Gold News

Gold Defies "Fatigue" Just Shy of $1,000; Stocks Tumble, Financial Panic Hits Europe, Real US Rates Stay Negative

Gold jumped Friday morning in London, coming within $2.50 of $1,000 an ounce to near its ninth weekly gain in 3 months as world stock markets slumped once again.

Gold Prices surged $15 an ounce from the highest London Gold Fix since 19th March '08 – the day after gold hit all-time highs at $1,032 on the collapse of Bear Stearns.

Defying analysts who saw "signs of fatigue" in the market, the Gold Price also hit new record highs versus all other currencies bar the Japanese Yen.

So far in 2009 Gold has now gained 13% vs. the Chinese Yuan.

Measuring Gold vs. the Old German Deutsche Mark – the most stable major world currency during the inflationary 1970s – gold today shot more than 6% above it previous all-time high of 21st Jan. 1980.

"Today is a significant day for gold as a close above the $988 resistance will confirm the next move in this bull run," reckon London dealers Mitsui.

Repeating that silver – up nearly 7% so far this week – will continue to "take its cue from gold," Mitsui believes that a failure to hold $988 may bring "some liquidation to the marketplace.

"[But] despite several attempts at prices sub-$970, gold continues to bounce back, showing its resilience."

Yesterday the SPDR Gold ETF trust fund reported adding almost 5 tonnes of gold to its assets – "a bit lighter than we have seen this month," notes Mitsui, wondering if "this decline is a sign that the investors are becoming exhausted or waiting for a pullback?"

Friday morning saw the Gold Price in Swiss Francs jump above CHF 1,175 per ounce – higher by more than 27% from New Year's Day – on news of a blow to Switzerland's model of Bankgeheimnis (banking secrecy).

Threatened with a law-suit by the new Obama administration in Washington, Swiss banking giant UBS agreed to pay $780 million in fines and reveal details of 52,000 accounts belonging to US citizens – worth $14.8 billion – apparently used to avoid US income tax.

"Swiss banks have [also] given billions of credit to Eastern Europe," notes a report in the Tagesanzeiger newspaper.

"Now the customers cannot pay back the money."

Writing for the Financial Times, former Bank of England policymaker Willem Buiter says capital controls on the free movement of money are now "most Central and Eastern Europe (CEE) and among the [former Soviet] CIS countries.

"We can expect to see capital controls imposed even by some of the European Union members from Eastern Europe that have not yet adopted the Euro as their currency," Buiter goes on, citing "the Baltics, Bulgaria, the Czech Republic, Hungary, Poland, and Romania."

Meantime on the equity markets today – where the London Stock Exchange called for the UK government to suspend Stamp Duty and increase tax-relief to venture capital trusts – stocks fell for the ninth session running according to the MSCI world index.

In Stockholm, ailing car-maker Saab – a division of US auto-giant General Motors – filed for legal protection against its creditors in a bid to avoid bankruptcy.

Here in London, mining giant Anglo American sank 12% on the FTSE100 after scrapping its dividend and announcing 9,000 job losses worldwide.

"The breadth and severity of the global economic downturn...are difficult to overstate," said CEO Cynthia Carroll.

Business activity across the 16-nation Eurozone sank in Jan. to its lowest level on the PMI's 11-year series, the Markit consultancy said today, adding that "There appears to be no sign of a bottoming out."

European stocks fell to a new 5-year low this morning after the S&P index on Wall Street dumped 5.2% Thursday to close at its lowest level since 1995.

New data this morning said US consumer prices failed to dip into deflation last month, rising 1.7% year-on-year in Jan. and leaving real Federal Reserve interest rates sharply negative.

Home repossessions here in the United Kingdom meantime shot more than 50% higher last year to a 12-year high, new figures showed.

UK car production slumped almost 59% in Jan. from a year earlier.

And on the political front, the United Nations said Thursday that Iran now has enough enriched uranium to build a nuclear bomb.

US secretary of state Hillary Clinton – citing a UN Security Council Resolution from 2006 – told North Korea it's now "required to suspend all activities related to its ballistic missile program.

"The North should refrain from violating this resolution, and also from any and all provocative actions that could...aggravate tensions in the region."

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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