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
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Bounces as World Stock Markets Slide; "No Bid" for Asset-Backed Derivatives

Commodities / Gold & Silver Aug 16, 2007 - 08:48 AM GMT

By: Adrian_Ash

Commodities SPOT GOLD PRICES ticked lower during a torrid session for Asian and European stock markets early Thursday, avoiding the worst of the current sell-off in financial assets to record a Morning Fix of $664.15 per ounce in London .


The Nikkei in Tokyo had earlier ended the day 1.99% lighter, while South Korea 's Kospi index dropped nearly 7% by the close. Despite reporting strong earnings growth, Commonwealth Bank of Australia dropped 5%, while Rams Home Loan – the Australian mortgage lender that warned on profits yesterday due to the global credit crunch – lost nearly 60% of its value.

European bourses opened 2% down and then continued to sell off. Losses on London 's FTSE100 – now below 6,000 for the first time since March – reached 3.1% by midday .

Gold priced against Dollars, meantime, bounced off Wednesday's low at $662.89 per ounce before rising towards Thursday's US open. That level, only 0.5% down from a month ago, compares with an 11% loss in both the Japanese Nikkei and the broad European stock markets. The S&P500 index in the United States closed Wednesday night 10% down from mid-July.

"Some of gold's drop [today] is equity-driven and some is Dollar-driven," reckons Simon Weeks at ScotiaMocatta in London . "People in Asia bought gold and they sold last night."

Overnight at the Tocom, gold futures for June 2008 lost 0.8% against the rising Japanese Yen, now at a five-month high on the currency markets.

"Our thinking is people should be buying [gold] on dips," says Weeks. "As we head into the weekend, we're looking for more insurance-related buying."

Priced against Sterling and Euros, gold has so far gained 0.8% this week as the two currencies have been routed below $1.98 and $1.34 respectively. Only the Japanese Yen has risen against the US currency, breaking through ¥114 to the Dollar late morning in London – a 5% move from this time last week that will put many leveraged forex funds under severe pressure.

Yesterday marked the deadline for hedge-fund investors to withdraw what's left of their cash before the third quarter ends in 45 day's time. Thursday's sharp losses in Asia and Europe – plus the 1% loss at the US open anticipated by Dow futures – show that a fire-sale to meet those redemptions in on.

As for the asset-backed credit derivatives that acted as collateral to help fund the recent stock market highs, J.P.Morgan told the Financial Times overnight that there are now "no bids" in the secondary market for much of this paper. Analysts at Dresdner Kleinwort say that 101 different credit-derivative notes now need downgrading by the credit-rating agencies.

The two biggest ratings agencies, Moody's and Standard & Poors, have already put $2.16 billion of such bonds on 'watch', more than 7% of the total sum issued since 2005. But that may be too little, too late for the world's regulatory bodies. Fears of legislation and possible legal action will only add to the market's disdain for mortgage-backed bonds amid the currency turmoil.

The European Commission said today it will investigate the ratings given to bonds backed by subprime US home loans. "The securitised subprime mortgage market would not have grown to the extent that it did without the favourable ratings given by some agencies," one official in Brussels said. Barney Frank, Democrat chairman of the US House financial services committee, thinks the agencies have "not done a good job" and says he will also investigate.

"Gold has been an oasis of calm compared to the deep losses seen across other asset markets over the past month," as John Reade at UBS in London said in a client note Wednesday.

The longer this credit crunch undermines confidence and valuations in all other financial markets, he believes, the more likely is becomes that gold will attract serious "safe-haven" buying by anxious investors tired of losing money.

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 2007

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