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
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21
S&P 500 Rallies To New All-Time Highs – Are The Markets About To Break Higher? - 5th Sep 21
Bond Conundrum - Boom or Bust for Gold? - 5th Sep 21
How the sale of a Sting CD sparked an Entire Online Industry - 5th Sep 21
Three Years of Fresh Thinking With Scott Dylan and Dave Antrobus - 5th Sep 21
Bitcoin Bear Market Trend Forecast 2021 and Model Crypto Portfolio Buying Levels - 4th Sep 21
The Most Actively Traded Companies on the Toronto Stock Exchange - 4th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Bounces off $1800 as Italy gets Shut Out of Bond Markets

Commodities / Gold and Silver 2011 Sep 13, 2011 - 08:27 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleTHE DOLLAR gold price dropped to $1800 an ounce early on Tuesday morning – a 6.2% fall from last Tuesday's record high – before recovering to around $1825 by lunchtime, as news that China could increase purchases of Italian debt failed to convince markets.

The silver price dropped to $40.12 – a 3.1% loss for the week so far – before it too rallied along with European stock markets, which recovered early losses.

Broad commodities rose, with WTI crude oil up 1.3% to $89 per barrel.

"Since present economic conditions provide plenty of reasons to bullish and very few to be bearish...round figures such as $1,800 can be useful indicators of where investors are prepared to buy back in to [gold] following a dip," said one London gold dealer this morning.

"We see [gold price weakness] as an opportunity for investors to buy," Vasu Menon, vice-president of wealth management at Oversea-Chinese Banking Corp. told Bloomberg Television on Tuesday.
"We recommend buying gold on dips," agrees a report from Societe Generale.

"The ongoing debt/deficit crisis is likely to result in an extended period of super lax monetary conditions in the U. and Europe... gold is likely to make fresh all-time record highs before year-end."

However, the gold price's "inability to reclaim the $1900 level has shifted the focus lower in the short term," warn technical analysts at bullion bank Scotia Mocatta.

China could be about to make "significant" purchases of Italian government bonds, the Financial Times reported on Monday, citing recent meetings between Chinese and Italian officials in Beijing and Rome.

Europe's problems, however, are "bigger than China alone can help with," counters Ju Wang, fixed income strategist at Barclays Capital in Singapore.

"China probably will continue to help to shore up the Euro, but its involvement in direct purchases of troubled Europe debt is unlikely to be too aggressive."

China has an estimated $3.2 trillion in foreign exchange reserves. At current exchange rates Italy's gross government debt for will amount to four-fifths of that by the end of 2011, according to International Monetary Fund forecasts.

The benchmark yield on 10-Year Italian government bonds hit 5.7% on Tuesday morning – the highest level since the European Central Bank began buying Italian debt last month.

Italy auctioned €3.9 billion of 5-Year bonds on Tuesday morning – at an average yield of 5.6%. This compares to 4.93% at an auction of 5-Year bonds in July. Italy's Treasury cancelled its August auction of medium-to-long term bonds, announcing that it would instead offer 12-month Treasury bills.

Italy is being "increasingly shut out of markets," says Rabobank rate strategist Richard McGuire, noting that Italy's yield curve has is flattening as shorter-date bond yields rise faster than longer-dated ones.

Elsewhere in Europe, it is Germany's "top priority to avoid an uncontrolled default [by Greece] because it would not only hit Greece," German chancellor Angela Merkel said Tuesday
"We would very quickly see a domino effect."

The yield on Greek 10-Year bonds hit 25% this morning, while shorter-dated 2-Year bond yields rose to 76%.

The perceived probability of a Greek default meantime rose to 98% on Tuesday, as implied by the costs of credit default swaps – which act as a form of bond insurance.

In the UK, meantime, "sustained high inflation is not a threat" in the current environment, Bank of England monetary policy committee member Adam Posen said Tuesday.

"The inflation that we have suffered due to temporary factors in the UK is about to peak...the right thing to do right now is for the Bank of England and the other G7 central banks to engage in further monetary stimulus."

Posen has voted to increase the Bank's quantitative easing program by £50 billion at every meeting since last October.

UK consumer price inflation rose to 4.5% last month – up from 4.4% in July – compared to the MPC's official target of 2.0%.

The gold price could challenge its previous inflation-adjusted high, as a result of an "extended period of negative real interest rates", according to a report published Tuesday by analysts at Morgan Stanley.

Gold hit $850 per ounce in January 1980. Adjusted for inflation, the analysts estimate that an equivalent high today would be around $2330.

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