Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Five Trillion Wiped off Global Stock Markets - Fed Emergency Interest Rate Cut Rumors

Forecasts / Financial Crash Jan 22, 2008 - 10:19 AM GMT

By: Adrian_Ash

Forecasts

THE GOLD MARKET bounced off a 2.1% slump at the London opening on Tuesday as global stock markets attempted to steady on wild rumors of emergency interest-rate cuts.

Following Monday's torrid action in Asia and Europe , the loss of world equity value for 2008 to date is now put above $5 trillion.


Investors looking to Buy Gold today, in contrast, found the metal trading only 5% off last week's all-time record high. The AM Fix in London was set at $862 per ounce, just as the FTSE 100 index crept up to show a 0.5% gain.

It had stood almost 4% lower during the first hour of trade.

"There are all sorts of rumors flying around, particularly surrounding the likelihood of the Federal Reserve cutting rates ahead of the scheduled meeting next week – or even of co-ordinated action between the US, UK and European Central Bank," according to Martin Slaney of GFT Global Markets.

"There is a good chance that the Fed will cut by 50 basis points today given what is happening with stock prices," reckons Divyang Shah of Commonwealth Bank.

Buoyed further by this cheap-money chatter, government bonds continued to rise alongside the US Dollar and Japanese Yen this morning in what one broker called a "pure panic-driven flight to safety."

The dash for cash pushed the yield on two-year US Treasuries down to 2.06% – a four-year low barely half the rate of US consumer-price inflation – as the Gold Market bounced off $850 per ounce and Japanese stocks closed out their worst session in more than 10 years.

"Everything is down, not just the Gold Price ," noted Ronald Leung of Lee Cheong Gold Dealers in Hong Kong to Bloomberg earlier.

"We still see some support at the $845-$850 level from short-covering and dip-buying, and I think gold is still in a long-term bull trend."

On the currency markets the British Pound hit an 18-month low vs. the Yen beneath ¥205.00, and the Euro fell to a one-month low on the currency markets beneath $1.4370.

Hong Kong stocks meantime dropped 8.7% of their value to stand fully one-fifth lower since New Year's Day. The Indian Sensex sank 9.5% at the opening in Mumbai, and trading was briefly suspended.

"There is no reason at all to allow the worries of the Western world to overwhelm us," said Indian finance minister P. Chidambaram earlier today. The European Union's economic & monetary affairs commissioner says that "at least in Europe the fundamentals of our economies are sound."

The UK chancellor also thinks that the global financial slump remains solely a "subprime" US problem.

Alistair Darling told the BBC last night that the UK economy remains "sound [and] robust" thanks to low inflation (now rising at a 10-year record rate) and strong employment (11.3% of British adults wanting a job are now without work).

In Germany, however, it was Monday's announcement from WestLB in North Rhine-Westphalia – the country's strongest state economically – that it would post a loss of €1 billion for 2007 which helped push the blue-chip Dax more than 7.1% lower for the day.

"Just a few months ago," as Deutsche Welle reports this morning, "WestLB issued a statement assuring investors that its exposure to subprime securities in the United States was 'relatively limited'."

Now all eyes are on the Wall Street open. US markets stayed closed for a national holiday on Monday. Dow futures quoted in London today put the industrial index more than 590 points lower from Friday's finish.

Most urgently, traders will want to review the price of the big "monoline" insurers, those firms which insure the value of bonds held by pension, investment and hedge funds.

Between them, the monolines now stand behind $2,400 billion of corporate, municipal and asset-backed securities worldwide. And on Friday, a major monoline insurer – Ambac – saw its own credit-rating downgraded from "triple A" to "double A" after scrapping a plan to issue $1 billion in new shares to defend its balance sheet.

Down by 92% in the last six months, Ambac's stock lost only four cents on the news, but the fear today is that the credit rating agencies will downgrade its competitors – and without that critical "triple A" rating, they'll be unable to raise funds and guarantee payment on the bonds they have already insured.

In Frankfurt this morning the cost of insuring against bond-default by European companies shot to new record highs, with credit default swaps on investment-grade debt rising 8% in price.

High-yield bonds became 6.4% more expensive to insure using CDS.

Meantime in the commodities market, US crude oil today dropped nearly 3% to hit a six-week low of $84.64 per barrel. Brent crude traded in London for March delivery fell $2.50 to $85 per barrel.

Corn, copper and zinc all fell "limit down" at the Shanghai Futures Exchange, and palm oil futures in Malaysia suffered their worst one-day drop in seven months after the Beijing government said it will release key supplies from China's food stockpiles ahead of next month's Lunar New Year celebrations.

The cost of living rose by 6.9% in Nov., an 11-year record. Now state officials are "closely watching the supplies and prices of basic living necessities."

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
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 2008

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.

Adrian Ash Archive

© 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

6 Critical Money Making Rules