Gold News

Gold Barely Touched in GBP, EUR as German Stock Market Dumps 7.1%; FTSE Suffers Worst Day Since 9/11

Twenty-eight years to the day since Gold Prices reached their long-term top of $850 per ounce, the Gold Market slipped 1.8% against the US Dollar on Monday as global stock markets collapsed by 5% and more.

By the close in London, the FTSE100 index of blue-chip British stocks stood more than 323 points lower after its worst session since Sept. 11th, 2001.

The Cac40 in Paris dropped 6.8% of its value. The Dax in Frankfurt lost 7.1%. The Sensex in Mumbai, India, had earlier finished the day more than 9% down, while the Australian ASX fell for the 11th session running.

"I've never seen fear like this," said one City broker to the Financial Times.

US investors holding only domestic stock remained sheltered from today's sharp plunge, thanks to Wall Street staying closed for Martin Luther King Day. But spread-betting prices quoted in London put the Dow more than 600 points down at an 18-month low.

"A gloomy concoction of poor economic and corporate news plus a growing acceptance that the sub-prime fall-out has much further to go has created the highly distressed conditions for a global sell-off in equities," added Martin Slaney, an analyst at GFT Global Markets.

"The latest rumor is that the Bank of China may write off as much as $1 billion in sub-prime related losses have added to the negativity."

Today's rout came as both the US Dollar and the Japanese Yen rose rapidly on the foreign exchange market. The high-yielding New Zealand Dollar – former darling of "carry trade" speculators, who borrowed cheap Yen at just 0.5% per year to re-invest elsewhere for easy gains – lost 3% against the Japanese currency.

By the end of business in Europe, the Euro stood more than 1.5¢ lower against the Dollar, trading down at a one-month low beneath $1.4440.

The British Pound sank to a nine-month low beneath $1.9450, and that helped the Gold Price in Sterling hold above £445 per ounce throughout the session.

Gold also lost just 0.5% for French, German and Italian investors, too.

"It was an unpleasant day for the Euro against the Dollar and the Yen," says Tom Kendall, an analyst at Mitsubishi, "and that filtered through into Gold Prices.

"We've swung from being wildly bearish on the Dollar and now the focus has shifted to the Euro."

Gold Prices recorded a PM Fix of $871.25 per ounce on Monday afternoon in London, their lowest fix against the US currency since Jan. 7th.

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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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