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Saturday, November 22nd, 2008
Bailout plans, Leninist style nationalisation and billion upon billion of tax payers’ money have so far failed to gain any investor confidence in the markets. Wall Street’s massive sell off on Thursday night followed by a free falling Nikkei sent investors seeking wealth protection into the safe haven of gold investment.
Spot gold rose $2.50 at $9.14 an ounce before New York’s notional close at 21:15 GMT.
“Investors only concentrate on gold. Stock prices and other commodities are not so good,” said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.
Ah, the eighties, the best decade ever! The best bands, the best lyrics and the best riots in the UK in centuries as the politicians of the day messed with the economy and people’s lives, and got things remarkably wrong. It would seem that in terms of the latter, little has changed today, but in the face of all this economic uncertainty around the globe one thing is holding firm – and that’s the price, and therefore the value, of gold.
As stock markets around the world tumbled on Monday, gold rose 4%. A yet further weakening of the dollar today has seen gold futures rise by more than twenty dollars – and the sentiment in the market would appear to be that the future is bright, the future is gold coloured – because greater numbers of investors are seeking safe haven assets for their cash.
Come on, wouldn’t you rather have a gold bar under the bed than all of your cash in a British, German, Spanish, Icelandic or US bank? Exactly – and you’re not alone in thinking that gold is the future, according to the Vancouver Sun, mints around the world cannot cope with demand for the precious metal in coin form and the US mint has widened its freeze on gold coin sales.
Yesterday’s slide in the volatile global equities market saw gold making further gains as more investors sought safe haven refuge.
Analysts predict that gold will continue to see gains in the near term while the key agenda for investors remains reduction of risk. Gold prices rose yesterday trading at $862.75 an ounce, up $5.30 an ounce at New York’s notional close on Monday - gaining almost 4% against losses on the equity markets.
Gold traditionally performs well when global equity markets slide, gold has also benefited from the decline in other commodities.
Unlike Europe, the US holds an organisational advantage in its ability to put together a structured and coordinated rescue plan; however, a coordinated bailout plan or European ad-hoc bailout, neither will do anything to stop the worsening global economies.
Monday trading has started with yet another dramatic slide in global equities with investors growing ever more nervous; sentiment is unlikely to recover anytime soon despite the bail out plan.
The global problem has gone far beyond a banking crisis with “real economy” data showing sinking world economies. US job losses have hit a 5-year high and the major European economies are either already in recession or soon to go into recession. A survey of manufacturers showed falling orders throughout the developed world and everywhere you look the story is one of negativity in terms of balance books and sentiment.
Gold slid nearly $4.00 on Monday, moving towards a two week low. Gold often works inversely to the dollar, which gained strength and reached a 13-month high against the euro.
Gold was trading at $890.90 an ounce, down by $3.90. If the trend for a rising dollar against the euro and pound continues further, downside pressure against gold is expected.
Investors also cashed in on recent gold rises and booked profits, withholdings in the world’s largest gold-backed ETF, the SPDR Gold Trust showing a drop to 739.95 tonnes as of October 6th from 755.26 last week.
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