Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Jumps Back Above $1400, as Contagion Hits Eurozone Bonds

Commodities / Gold and Silver 2010 Nov 11, 2010 - 09:47 AM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleTHE PRICE OF GOLD gave back an earlier rise in London trade on Thursday morning, still recording its third-highest ever Gold Fix – and the fourth Fix this week above $1400 an ounce – as Asian stock markets closed marginally higher but European share markets stalled.


US crude oil contracts had leapt to a fresh two-year high above $88.50 per barrel in Asian trade. Three-month copper futures in London touched a new all-time record at $8966 per ton.

The gold price in Euros meantime jumped within 2% of June's all-time high, hitting €33,250 per kilo as Greek, Irish, Portuguese and Spanish government bonds all slumped – dragging the single currency back to yesterday's 1-month low – after a Greek official said Athens' 2010 budget deficit will hit 9.3% of GDP, rather than the 8.1% set by the joint European Union/IMF €110 billion support package.

Last year's Greek budget deficit is also being revised higher, the official said, rising above 15% of GDP.

"Does the [European Central Bank] understand the concept of contagion?" asks RBS bank's Jacques Cailloux in a note.

"The collapse of the Irish bond market [on Wednesday] is testimony that the periphery crisis is developing faster than any European policy maker had anticipated. The ECB should be more proactive and support Spain before the crisis spreads.

"Now is [the] time to act."

The gold price in Euros has now risen 7.3% since the single currency began falling a week ago from new 2010 highs to the Dollar.

At Thursday's AM Gold Fix in London, the daily correlation between Dollar-Gold and the Euro/Dollar exchange rate turned negative for the first time in nine weeks (rolling 1-month basis).

During the first nine years of the single currency's existence, gold and the Euro averaged a strong, positive correlation of 0.50 against the Dollar. That figure would read +1.0 if they moved precisely in lockstep.

The correlation has now been negative – with the Euro and gold moving in opposite directions – on 104 out of 219 trading days in 2010 to date.

"The strong theoretical relationship between gold prices and peripheral European sovereign CDS [credit-default insurance] rates will need to be reappraised" however, reckons the latest Commodities Weekly from Natixis bank, following Germany's proposed changes to the Eurozone's €440 billion emergency rescue fund.

"Private bondholders will henceforth be expected to bear some of the costs in the event of a default or restructuring...instead of leaving tax payers to foot the entire bill," write Nic Brown, Lysú Páez-Cortez, Bernard Dahdah and Micaella Feldstein.

For now, "the strong positive relationship still exists. [But] the explicit removal of a full bail-out for bond holders means many holders of Euros may feel less exposed to a potential sovereign default" via monetary inflation.

"German households already hold more gold that the Bundesbank – the world's second largest central bank holder of gold," Natixis' team concludes. "Merkel's proposed reforms may give them more comfort in holding Euro cash or core-European government debt instead."

Meantime on the data front this morning, Machine Orders in Japan reversed an earlier 10% month-on-month rise, while its Tankan survey showed a sharp decline in business sentiment.

New Zealand reported a jump in domestic food prices, but Australia reported a surprise jump in its jobless rate – news that "failed to dent buying interest" amongst Chinese gold traders however, and "bullish demand" for precious metals continued, according to a Hong Kong dealer, when Beijing reported slower-than-expected but still stellar growth in both Industrial Output and Retail Sales.

China's consumer-price and factory input inflation both rose sharply last month, other new figures showed.

Despite a slight rise in deposit rates, the real rate of interest paid to cash savers fell in October to minus 1.9% per year.

"US monetary policy made a very big mistake under Greenspan and Bernanke," said Nobel-winner and Columbia professor Joseph Stiglitz in a speech today.

"Hong Kong should recognize that it is a very big mistake, and use a full gambit of instruments to stabilize the market," said Stiglitz, urging exchange controls across the world's emerging economies to block "hot money" investment fleeing sub-zero real rates in the rich West.

"China has had capital controls on short-term flows that have worked, not perfectly, but have worked to stabilize [in]flows."

"We are going to be moving into a new global regime in which we will have all kinds of impediments on the flows of capital, of short-term capital."

"The real issue is...how do we coordinate policy?" India's chief negotiator Montek Singh Ahluwalia asked Reuters today, as the G20 summit of developed and top emerging-economy politicians began in Seoul, South Korea.

"I don't think you should be too demanding...because such policy coordination has never been attempted before."

By Adrian Ash

BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in