Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Recovers One-Third of "Bernanke Plunge"

Commodities / Gold & Silver Jun 04, 2008 - 09:43 AM GMT

By: Adrian_Ash

Commodities SPOT GOLD PRICES recovered one-third of yesterday's $18 plunge early Wednesday as crude oil slid to a three-week low and European equity markets dropped 2%, led lower by mining and banking stocks.

The Euro ticked higher against the Dollar, regaining a quarter of Tuesday's two cent plunge.


That fall was also sparked by Ben Bernanke, chairman of the Federal Reserve, noting the inflation risks posed to the United States by its weak currency.

"Bernanke's remarks strengthened speculation that the Fed may not cut interest rates further," says Shuji Sugata at Mitsubishi Futures & Securities in Tokyo , "preventing investors from putting money into commodities."

"With interest rate futures now pricing in a 98% probability of the Fed holding rates constant this month," agrees Manqoba Madinane in today's Gold Market note from Standard Bank, "plus a 30% probability of increasing rates by 25 basis points in October, we see the Dollar well supported in the near term.

"That could further contain near-term precious metals demand.

"Furthermore, equity index futures are also pricing in near-term gains in the US and Asia , which could see money flowing into equities."

Money flowed out of European stock markets on Wednesday, however, with the Cac40 in Paris and FTSE100 in London both losing 2% by lunchtime.

US stock futures pointed lower after the Financial Times said that Lehman Brothers – the fourth-largest US bank – lost $500-$700m in the last three month on "certain hedging positions".

The Wall Street Journal reports that, contrary to Lehman's own statements, the bank is looking to raise fresh capital from big foreign investors, already approaching "at least one" fund in South Korea .

The central banks of both Sweden and Norway warn that "the [subprime] turmoil has spread to new assets, markets and participants. The uncertainty...will probably persist for a long time to come."

Here in the United Kingdom , "ongoing economic weakness in 2009 would argue against fiscal restraint," says the Organization for Economic Co-Operation & Development (OECD) in its latest UK report. But "the government's options have been limited by excessively loose fiscal policy in past years when economic growth was strong."

The OECD forecasts a 10% drop in UK house prices by the end of 2009. Today the British Pound slid to a two-week low beneath $1.9535, helping the Gold Price in Sterling move back above £450 per ounce.

"It looks to me as if foreign central banks and sovereign wealth funds are losing faith in the UK," said Michael Saunders at Citigroup yesterday after the Bank of England reported non-residents selling gilts and Treasury bills at the fastest rate in five years.

Foreign investors funded some two-thirds of the UK 's current-account deficit between 2005 and 2007, Saunders told the Financial Times .

"I would say Gold is still in a range of $850 to $900 for the time being," said a dealer in Hong Kong to Reuters overnight, "We are all waiting for Friday's [official] US non-farm payrolls data."

Today brings the monthly ADP report of private-sector US payrolls, expected to show a loss of 30,000 jobs in May.

Early today the Mortgage Bankers Association (MBA) reported a 15% drop in US mortgage approvals for last week. Compared with the final week of May 2007, approvals stood 20% lower.

As the New York opening drew near, 10-year US bond yields slipped to 3.86% and two-year yields fell to 2.39%.

The rate of consumer-price inflation in the US was last pegged at 3.9%.


Tuesday's two per cent plunge in the Gold Market came after Fed chairman Bernanke said that the plunging US currency might lead to inflation inside the United States – a "highly unusual" move, as John Authers notes for the FT , "since the Fed does not have responsibility for the Dollar.

"That was taken as a hint by the foreign exchange market that government intervention could be on the way."

The drop also came as trading began in options on New York's GLD exchange-traded gold fund – formerly known as the StreetTracks ETF and now called SPDR.

"Trading got off to a fairly solid start," notes Chris Tyler for Optionetics, "although much of the activity had the earmarks of institutional players."

The most active contracts – "sporting a slightly bearish outlook" – were put options dated for July and Sept. They give their owners the right to sell the GLD fund at an equivalent Gold Price of $850 an ounce.

December puts pricing gold at $770 an ounce also saw volume exceed 2,000 contracts.

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