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
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Trades Higher as U.S. Debt Mountain Set to Soar

Commodities / Gold & Silver Nov 14, 2008 - 09:41 AM GMT

By: Adrian_Ash

Commodities Best Financial Markets Analysis ArticleTHE WHOLESALE PRICE OF GOLD traded internationally jumped late-morning in London dealing on Friday, rising 5.4% from yesterday's three-week low against the Dollar and touching a five-week high above £500 an ounce for British investors.


World equities caught up with one-half of Thursday's near-7% gain in US stocks, while crude oil ticked lower from $58 per barrel.

Government bond prices rose, pushing 10-year US Treasury yields down eight points to 3.77%. Wild volatility on the currency markets left the major cross unchanged from the start of Asian trade, despite news that Germany – Europe's largest economy, and third in the world after the US and Japan – officially slid into recession by end-Sept.

" Gold found support at the $700 level yesterday," notes Friday's comment from Mitsui, the precious metals dealer in London.

"Given the strong physical demand globally, expect the $680-$700 area to remain key support for the short term."

But "some investors aren't convinced the rally will be sustained," reckons Wallace Ng, a Gold Bullion and silver trader in Hong Kong for Fortis Bank, "because the Dollar may strengthen and no one worries about inflation now."

Inflation in Europe held flat between Sept. and Oct., new data showed today, with the cost of living rising 3.2% year-on-year on average for the region's 320 million citizens.

Month-on-month, today's US import price inflation was expected to show a 4% drop.

"Discipline in the global economy is needed to foster stability and help balance short-term and long-term prosperity more appropriately," said Jean-Claude Trichet – head of the European Central Bank (ECB) – in a speech ahead of this weekend's G20 summit of world leaders in Washington.

Now widely reviled for raising interest rates on the Euro in July to fight inflation – even as the world's largest economic zone was beginning to contract – M.Trichet spoke at length on the "exceptional liquidity support by central banks" to the financial sector.

But "if we are to 'build together the capitalism of the future,' as [French president] Sarkozy puts it," writes economist and author Judy Shelton for the Wall Street Journal today, "the world needs sound money.

"Does that mean going back to a Gold Standard , or gold-based international monetary system? Perhaps so; it's hard to imagine a more universally accepted standard of value."

( To learn more about the Gold Standard & Its Demise read here... )

"China should have at least several thousand tons of gold in its reserves, five to six times the officially announced 600 tonnes," said Hou Huimin, vice-chair of the China Gold Association, to Bloomberg News in Beijing today.

At today's AM Gold Fix , Beijing's official gold-hoard of 600 tonnes was worth just $14 billion – less than 1% of its total foreign currency reserves of $1.9 trillion, the vast bulk of it held in US Treasury bonds and notes.

"There's no doubt that gold would be attractive," reckons Kenichiro Ikezawa, manager of $3 billion in assets at Daiwa SB Investments in Tokyo, "as US debt is likely to swell.

"In the long term, both the Dollar and Treasuries will probably weaken. It's possible that China will buy more gold, though the country is likely to do so gradually."

The US Treasury yesterday reported an all-time record budget deficit for October, with outlays outweighing income by $237 billion.

Thanks to the Treasury buying $115 billion of equity in major private banks – as well as $21.5bn of mortgage-backed securities from Fannie Mae and Freddie Mac – government spending accounted for $1 in every $3 spent in the US economy last month.

Gold Mining production, in contrast, continues to contract, and now "over 80% of current mined gold production is over 15 years old," reports Lawrence Williams for MineWeb today after attending RBC's gold seminar in London.

"Some big mines are nearing the ends of their days, ore grades are falling, underground mines keep getting deeper, costs are rising and junior gold exploration has come to an abrupt halt" thanks to the global credit crunch hitting higher-risk fund raising.

Pierre Lassonde – the veteran gold analyst, co-founder of Franco Nevada Mining, acting chairman of the World Gold Council (WGC), and former head of world No.2 Newmont Mining – told the conference that global Gold Mining production is likely to fall around 7% over the next few years, "possibly more."

Despite near-term risks due to the ongoing financial turmoil affecting all investment flows outside government bonds, "Gold's fundamentals on the supply/demand side remain strong in terms of being price supportive," he believes.

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

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

melinda penner
15 Nov 08, 15:19
gold set as payback to china for 1.9 trillion debt

check this possible scenario out.


Post Comment

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