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
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
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 - 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
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 Remains Safe Haven Amid Global Currency & Stock-Market Crash

Commodities / Gold & Silver Oct 27, 2008 - 11:50 AM GMT

By: Adrian_Ash

Commodities THE SPOT PRICE OF GOLD BULLION sank and then bounced hard vs. the Dollar early Monday, whipping violently against all major currencies as world stock markets added to this year's 40% losses to date.

"While [the crucial Indian festival of] Diwali is just one day away in India," notes precious-metals dealer Mitsui in London today, "it is important to note that physical demand is strong globally, and this may help to support the Gold market at these levels.

"Silver remains in a down trend, and the charts do not look positive."

The London Gold Fix was set this morning at $720.50 per ounce, more than 4% above Friday AM's thirteen-month low, as the International Monetary Fund (IMF) announced a $16 billion emergency loan to the Ukrainian government.

Western Europe now risks becoming "the second epicenter of the global financial crisis," claims Stephen Jen at Morgan Stanley, because the region's banks hold three-quarters of the emerging world's $4.7 trillion in outstanding cross-border debts.

"Just as the Asian Currency Crisis in 1997 undermined Japanese banks which had large exposures to Asia," says Jen, "so problems in Eastern Europe could have a negative feedback effect on European and Swedish banks."

Back in precious metals, meantime, the Gold Price in Euros today held above last week's close at €580 per ounce, while the single currency rallied from a new 30-month low beneath $1.2340.

For British investors and savers, the price of Gold Bullion leapt to an 8-session high as the Pound Sterling sank once again on the currency markets.

"We reaffirm our shared interest in a strong and stable international financial system," said a joint-statement published Sunday by leaders of the G7 economies. It hinted at co-ordinated intervention in the currency markets after "recent excessive volatility in the exchange rate of the Yen."

Since the global credit crunch first bit in August 2007, the Japanese currency has risen by more than one-third against the US Dollar – even as the greenback itself has turned sharply higher – reversing the previous 12 years of weakness. ( Learn more about this Dollar-Yen Comeback here... )

The Yen has also gained nearly one-half vs. the Euro, and shot more than 75% higher against "commodity currencies" such as the Canadian and Australian Dollars as borrowed money – the so-called Yen Carry Trade – flees back to Japan amid what one analyst today called "panic selling".

Today the gold price in Japanese Yen fell back towards last week's two-year lows at ¥2,000 per gram, with Tetsuya Yoshii – head of derivative products at Mizuho in Tokyo – telling Bloomberg that " Gold is a safe haven, but right now people are just fleeing for cash."

Hong Kong shares today lost more than 12% of their value, while India's Sensex dropped to a fresh 3-year low – down almost 48% from its top of Jan. '08.

London and Frankfurt both lost another 4% in morning trade, while the Japanese stock market itself plunged through its bottom of March 2003 to close at a 26-year low of 7,162.

The Nikkei has now lost 60% of its value since hitting all-time record highs on a flood of cheap money and real-estate speculation two decades ago.

"People are just liquidating," said one Hong Kong fund manager to Reuters today. "Nobody can predict where the bottom is."

"The risk of forced selling as prices fall further is the essential challenge facing the market as it makes a bottom," agrees Stuart Schweitzer, global markets strategist at J.P.Morgan Private Bank, speaking to the Financial Times.

Speculation in Gold Futures and options continues to shrink as credit dries up and investors are forced to close even winning positions. According to the latest data, the total number of open contracts in US gold derivatives falling by more than 10% in the month to last Tuesday.

Since peaking in Jan. this year, open interest in Comex gold contracts has shrunk by 37%.

Hedge funds and other "large speculators" have more than halved their bullish betting on gold since mid-July, slashing it to the smallest size since Christmas 2006. Private individuals playing the gold derivatives market cut their bets by one-fourteenth, and they cut their bull-to-bear ratio from 63% to just 57% – a new four-year low.

"The fact that gold did not head higher during the current leg of the [global financial] crisis seems to reflect a combination of the rise in the US Dollar, de-leveraging of commodity positions, sales to meet margins calls on other assets and the unwinding of the long gold-short dollar trade by some investors," says the new Gold Investment Digest from marketing group the World Gold Council (WGC).

"The current crisis has seen much more pressure on gold as an 'asset of last resort', where Gold Has Been Sold to Meet Margin Calls , when there have simply been so few other viable options available.

"The unwinding of commodity positions has also had a more direct effect on gold, as the yellow metal is often bought as part of a commodity basket or broader commodity trade."

US crude oil prices fell on Monday below $62 per barrel – down by 60% from July's record high – despite the Opec oil cartel agreeing to cut its output quota by one-barrel-in-20 from next month.

The price of coal shipped to Asian power stations from Australian mines meantime slid below $100 per ton for the first time since March, while copper futures traded at the London Metal Exchange (LME) lost almost 7% to stand two-thirds below their record peak of May.

Soft commodity prices fell up to 2.5% in late Asian trade, with soy beans losing half their Dollar-value since June.

Bloomberg News says today that the cost of buying credit-default insurance against the corporate bonds of Glencore International – the world's largest commodity trader – has risen five times over since mid-August to reach 12.4%.

Chicago-based Citadel – the $20 billion hedge fund group – admitted on Friday that two of its main offerings have cost investors more than 35% of their money so far this year.

Co-manager of listed hedge fund GLG Partners, Emmanuel Roman, believes that between 25% and 30% of the world's 8,000 hedge funds will disappear "in a Darwinian process" amid the current financial meltdown.

GLG's own stock, floated on the NYSE in Mar. 2007, has shed four-fifths of its value since this time last year.

Across the world in the crucial physical Gold Bullion Market of India , meantime, tomorrow's Diwali "festival of lights" is expected to produce lower gold sales than 2007's record. But the recent drop in Rupee Gold Prices from early October's all-time highs is expected to encourage jewelry and small-bar investment, however.

"Sales for the Dhanteras festival were very high over the weekend" said a jewelry dealer in Ahmedabad to Reuters today. "Fluctuating Gold Prices are making customers cautious," said a jeweler to the Calcutta Telegraph . "Cautious but optimistic," is how another dealer described this autumn's outlook.

"Reduced demand has to much to do with the dramatic weakening of the Indian Rupee against the US Dollar," writes Wolfgang Wrzesniok-Rossbach at Heraeus, the global refining group based in Hanau, Germany.

"The Indian currency has lost 20% in the past eight weeks, making gold accordingly more expensive in the local currency.

"At the moment we see a medium-term downside risk [in Gold ] to be in the range of 5-10%. On the other side, technical resistance is at $760 and then again only above $800 an ounce."

By Adrian Ash

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 , 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 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


27 Oct 08, 12:51
Highland Gold Mining

Highland gold has tanked. Why so badly? It was at 200 last year when it was losing 2 million a quarter and now it is in profit to the tune of 22 million, with Abromovich backing it and 305 million in the bank. I understand that the shares will have halved in value because of the current economic crisis -but these have lost almost 90% despite the fact they are doing well.

Can anyone explain this to me please? Why is it getting so slaughtered, i thought gold was meant to be a safe haven.

27 Oct 08, 12:57
The Reat Safehaven

What it shows is that in a time of crisis the real safehaven is the US Dollar and not gold. The reason why the dollar is the real safehaven is because it is the worlds reserve currency which allows the US to get away with printing dollars in a crisis wheras any other country would see their currency crash (except japan).

Therefore all the bets on gold being the safehaven are unravelling.

Post Comment

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