Investors Flee to Gold after Fear Driven Wall Street Sell Off

Summary: Gold is reaching new highs following a fear driven sell off on the world’s stock markets, analysts predict gold could go higher

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.

Analysts expect that gold could rise to $930 next week, testing the $950 limits.  Gains in gold may be corrected if, despite the turmoil in the U.S. market, the U.S. Dollar continues to gain against the euro and pound.

“I think a lot of people will be speculating about $1,000 gold again, and I personally think it’s not very far away,” said Adrian Koh, analyst at Phillip Futures in Singapore.

The CBOE’s Vix index, also known as Wall Street’s fear gauge, hit a record high near 65 as the selling accelerated into the close of trading.  Bond volatility also rose amid continued stress in money market rates, and an historic dislocation in the US 30-year Treasury and swap rate sector.

In the UK, the FTSE finished Thursday at a fresh 4 year low dragged down by Barclays who slid 13.1% in the day, as buyers pulled away ahead of Friday’s auction to settle credit default swaps, a type of insurance contract, on Lehman Brothers’ debt.  Investors also fear that Barclays will soon be asking shareholders for more cash.

Edel Tully, a strategist at Mitsui Precious Metals, said the escalating plague attacking financial markets did not appear to be responding to the prescribed medication.  “We are quite optimistic that gold will see $1,000 once again in the current quarter, and sooner rather than later.”

While bullion investment was once the preserve of the privileged few, companies such a BullionVault have made it easy for anyone to take advantage of gold’s safe haven qualities during financial turmoil.

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