Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Margin Hike on Gold Futures, France Debt Similar to US

Commodities / Gold and Silver 2011 Aug 11, 2011 - 11:36 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleTHE SPOT MARKET gold price spiked to over $1814 an ounce in Thursday's Asian trade – up 9% on the week – before falling after news that gold futures will be subject to a margin hike.

The gold price at Thursday morning's London Fix set records in all three currencies – Dollars, Pounds and Euros – at $1786, £1105.74 and €1254.39 per ounce respectively.

Silver prices ended the morning around $39 per ounce – up 1.7% for the week.

Stock and commodity markets continued falling Thursday morning London time, following rumors that France could be next to suffer a ratings downgrade.

"With serious doubts still overhanging world's largest economies and various Eurozone nations still trying to avoid default, traders and investors are unlikely to rush back into rebuilding risk exposure," says Swiss gold bullion refiner MKS.

"A driver of gold currently," adds a note from UBS, "is the search for safety, driven by fears over global growth and the potential for sovereign debt downgrades in the US and Europe."

France was hit by rumors Wednesday that it would be the next triple-A sovereign to have its debt downgraded, following ratings agency Standard and Poor's announcement last Friday that it had stripped the US of the top notch credit rating.

"The debt ratios of the US and France are very similar," says Julian Callow, chief European economist at Barclays Capital, adding that France has "economic rigidities", as well as the further burden of contributing to the European Financial Stability Facility – which European leaders agreed last month should be empowered to buy government bonds on the open market.

"People are asking themselves whether S&P can downgrade the US without downgrading France."
President Sarkozy recalled key ministers from holiday Wednesday and vowed that the country's "pledges will be kept whatever the evolution of the economic situation".

Sarkozy gave finance ministers one week to devise fresh deficit-cutting measures.

All three major ratings agencies – S&P, Moody's and Fitch – moved to confirm France's triple-A status on Wednesday.

"That is completely in line with the reasons for [S&P's] downgrade of the US," says a note from wealth management firm Sanford Bernstein.

The US downgrade "was more about concerns over the willingness of the US to pay than the ability of the US to honor its obligations. There is no indication whatsoever that France would waver in its determination to honor its obligations."
There was one sovereign downgrade on Wednesday. Fitch joined S&P and Moody's in downgrading Cyprus – knocking it down from A- to BBB.

In Switzerland meantime, central bank officials have confirmed that they would consider pegging the Swiss Franc to the Euro.

"Any temporary measures to influence the exchange rate are permissible under our mandate as long as these are consistent with long-term price stability," said Swiss National Bank vice chairman Thomas Jordan in an interview published Thursday.

"It's certainly not the easiest measure to introduce," notes SNB governing board member Jean-Pierre Danthine, "neither in political nor legal terms."

Danthine points out that the SNB's mandate is "to conduct an independent monetary policy". In a floating currency regime without capital controls, central banks have traditionally struggled to combine monetary independence with maintaining a peg to another currency.

The SNB has repeatedly said the Swiss Franc is "massively overvalued". Yesterday it announced it was increasing liquidity by 50%, while last week it pledged to set interest rates "as close to zero as possible".

Other central banks have also been active in recent days. The US Federal Reserve said Tuesday it expects to keep interest rates at record lows for at least two years.

The Bank of Japan last week increased by 20% its quantitative easing program, while the country's finance ministry intervened to halt the rise of the Yen on currency markets. The BoJ has also resorted to directly buying the shares of exchange traded funds on the stock market.

In Europe meantime the European Central Bank began buying Spanish and Italian government bonds at the start of this week.

Central banks' actions are "necessary but not sufficient," says Mohamed El-Erian, chief executive of world's largest bond fund Pimco.

"We need other get their act together."

Over in the US, the Chicago Mercantile Exchange announced Wednesday that it is raising the margins for trading 100 ounce gold futures contracts on its New York-based Comex exchange by 22.2%. It follows a 10% margin hike for gold futures traded on the Shanghai Gold Exchange earlier in the week.

The Dollar gold price dropped over 1% immediately following Thursday's news of the CME hike.

Over in Germany meantime tabloid newspaper Bild is today running a contest to win gold bars. Ten 20 gram gold bars will be given away to winning callers each hour.

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.

© 2005-2022 - 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