Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Hits Fresh Records, Stocks Enter Bear Market, Fed Needs to "Do What It Takes to Cause Inflation"

Commodities / Gold and Silver 2011 Aug 09, 2011 - 12:58 PM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleU.S. DOLLAR gold prices raced to $1778 an ounce Tuesday morning London time – a record high, and 9.6% up since Aug. 2, the day President Obama signed the US debt ceiling bill.

In contrast, silver prices dropped to a low of $38.06 per ounce – 0.7% down on last Friday's close.

Gold prices at Tuesday morning's London Fix set new records in all three currencies – the Dollar, Pound and Euro.

Commodities were mixed, while stocks continued to plummet as policymakers on both sides of the Atlantic consider their next moves.

"Being so close to the market, it feels very crazy," says a Hong Kong bullion dealer.

"A few months later [however] this is just going to be a blip on the chart."

"The market is now worried about another global recession," adds Natalie Robertson, a ANZ Bank commodity analyst.

Stock markets continued their downward slide on Tuesday, with the UK's FTSE 100 index officially entering bear market territory. The FTSE dipped to 4796, more than 20% down on February's 2011 peak.

The MSCI All World index also entered a bear market after falling for the tenth day running.

Falling stock markets "have highlighted that world growth is weakening" says Jason Teh, portfolio manager at Investors Mutual in Sydney, which oversees around $3 billion in assets.

"The question is, when do you expect the government to provide some sort of intervention measure or stimulus?"

The US Federal Reserve should make it "very clear" that it is trying to create "moderate inflation", says Harvard economist Kenneth Rogoff.

"Out-of-the-box policies are called for, especially much more aggressive monetary policy," the former Fed economist said Monday.

"In the classic classroom QE, it's say, 'I'm trying to create inflation...and I’m going to do whatever it takes.'"

Ratings agency Standard & Poor's continued its downgrading of US debt instruments on Monday, following last Friday's decision to strip US sovereign debt of its AAA rating.

Mortgage finance companies Fannie Mae and Freddie Mac – both dependent on the US government – had their ratings cut, as did several insurance providers, including Warren Buffett's Berkshire Hathaway.

"The market's near-term focus will be on further ratings downgrades to come," says Tom Pawlicki, precious metals and energy analyst at MF Global.

"Any potential [Fed] action to implement further easing will also offer support [to gold]. In the background, support will come from central bank buying, investment inflows, and weakness in economic data."

The Federal Open Market Committee will announce the Fed's latest monetary policy decisions later today.

"We expect gold prices to continue to climb in 2011 and 2012 given the current low level of US real [inflation-adjusted] interest rates," said a note from Goldman Sachs Monday, in which the investment bank upped its 12-month gold price forecast to $1860 per ounce.

"Real interest rates...remain supportive of gold," agrees Walter de Wet, commodities strategist at Standard Bank.

"The futures market now firmly believes the Fed will hold rates constant for much longer, assigning a probability of more than 82% to a flat funds rate for at least another 12 months. This would put short term real interest rates in negative territory well into 2012."

Over in Europe, Spanish and Italian bond prices continued to rise Tuesday morning – pushing their yields closer to 5% – as the European Central Bank continued to buy the government debt of the third- and fourth-largest economies in the Eurozone.

The ECB will want to "make a strong statement with their purchases reckons Elwin de Groot, senior market economist at Rabobank Nederland in Utrecht.

"They're likely to continue with this [bond purchase program] for some time."

Here in the UK – where leaders have cut short holidays to respond to rioting in suburbs of north, south, east and west London as well as elsewhere in the country – there were further signs of economic slowdown in Tuesday morning's data.

Manufacturing production fell 0.4% in June – with year-on-year growth slowing to 2.1%, down from 2.8% the previous month. The trade gap for goods meantime widened to £-8.87 billion – a 4.8% change from May.

"The worry," says James Knightley, London-based economist at ING Group, "is that plunging equity markets will hurt business confidence and lead to firms cutting orders thus prompting further falls in a result, the prospect of further action from the Bank of England continues to grow."

The State Bank of Vietnam announced Tuesday that it will allow dealers to import five tonnes of gold bullion – and may also allow a further five tonnes to be imported in the coming weeks – after domestic gold prices diverged sharply from those quoted on the international spot market.

The SBV – which controls them import and export of bullion via licenses – said the decision will "stabilize" Vietnam's gold market, though it advised people against buying gold right now because of the inflated domestic price.

By Ben Traynor

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

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

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 - 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