Gold Prices continued to jump higher in early London trade Friday, breaking new one-month highs above $926 per ounce as crude oil reached new all-time highs and Asian stock markets closed the week almost 3% down.
The US Dollar fell to a three-week low vs. the Euro. But Gold still outpaced the European currency, hitting its best level since May 23rd at €588 per ounce.
Versus even commodity-currencies such as the Australian Dollar, in fact, Gold added 4.5% from Wednesday's low as Friday's US opening drew near.
Base metals meantime ticked higher, and corn prices reached their second all-time record in two days.
European stock markets, in contrast, took the week's losses to almost 5% on news of a three-year low in consumer confidence and a sharp fall in Eurozone retail sales.
"The US stock market is now near-term very over-sold and we could get a bounce," said Asian-based fund manager Dr.Marc Faber to CNBC after Wall Street dropped 3% yesterday.
This month was The Dow's Worst June Since the Great Depression of 1930.
"[But] obviously we will go lower over time," Faber warns, predicting 150 bank failures in the next 12 months.
"The first thing people should do is stop listening to the Federal Reserve, specifically to Mr. Bernanke. They are misleading the public and investors by talking about a 'Strong Dollar' policy.
"When it comes to action, they show no concern about inflation...So what people should do, basically, is to Invest in Gold. Because the purpose of money is to be a store of value, and when interest rates are negative it destroys the wealth of honest depositors who have their money in the bank and don't want to speculate."
This week's "no change" vote by the Federal Reserve left US interest rates more than 2.0% below the current rate of inflation.
Historical research from Michael Lewis at Deutsche Bank confirms the "strong performance" of Gold when real US interest rates move "deep into negative territory." (For a full report on Gold, Inflation & Interest Rates click here...)
"I'd rather Buy Gold than oil today," says Marc Faber, "because gold hasn't gone up as much, and with money printing by central banks – not just in the US but elsewhere as well – and with very low ownership of gold, I think a lot of money will shift into gold."
Crude oil today neared $142 per barrel – more than double its price of June last year – after Libya confirmed that it's considering a cut in output to protest against US anti-terrorism laws.
Passed by Congress in January, the new laws allow the seizure of Libyan assets to compensate families of Libyan-linked terrorist victims.
Two lawsuits have already been filed, according to Bloomberg. "We hope that we reach a solution that at least respects the sovereignty of the different countries," said Shokri Ghanem, head of Libya's National Oil Corp., to the newswire overnight.
Libya only accounts for some 2% of daily world oil production. But "with growing investor fears of a medium- to long-term oil supply deficit," writes Manqoba Madinane in today's precious metals note from Standard Bank in Johannesburg, "short-term supply disturbances exacerbate price volatility.
"The oil price spike should boost global inflation expectations which could see investment funds increase their precious metals exposure."
Consumer price inflation in Japan – victim of a 15-year deflation in wages and house prices to 2005 – hit a decade-high in May, the official Tokyo data agency said this morning.
Household spending fell and the jobs market stagnated.
Over in India – the world's hungriest market for physical Gold Bullion – inflation last week hit 11.4%, its highest rate since records began in 1995.
Only this Tuesday, the Reserve Bank of India hiked Rupee interest rates for the second time in two weeks at an unscheduled meeting. But the cost of money still lags inflation at just 8.5%.
And in China, meantime, iron ore imports leapt during the first four months of 2008, the government customs dept. said today.
Between Jan. and April – when the US economy grew barely 1.0% annualized according to Thursday's GDP figures – China imported some 150 million tonnes of iron ore, up more than 15% year on year.
Thanks to the surging cost of raw materials, however, the cost of that 15% growth reached more than 110% for Chinese importers.
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