Gold News

Gold leaps on weak US factory data; "consumers getting poorer; buy gold"

Gold Prices leapt higher late in London on Thursday, recovering all of the previous $6 drop – and more – to close European trade 0.7% higher.

The sudden gains in the Gold Market came after the US Commerce Dept. said factory orders fell at their fastest rate in seven months in August, dropping 3.3% from July against the 2.8% drop forecast by Wall Street.

US stocks moved sideways, while the Euro jumped nearly one cent higher against the Dollar to $1.4150.

The number of newly redundant US workers applying last week for unemployment benefit also proved worse than expected. Tomorrow (Friday) brings the much-awaited US jobs report for Sept.

Looking ahead, "consumers and wage earners are going to get poorer and poorer relative both to expectations and to the recent past," said Philip Manduca, managing partner of the $500-million Titanium Capital fund in London, to a Bloomberg News anchor in an interview on Thursday.

"What that translates into downstream is the standard of living of most people in the West is not going to get better relative to mean growth over the course of the last 20 years. So there are going to be lots of calls for monetary ease and wage improvements. [But] the problem here is you just haven't got the growth, you haven't got the margins, you haven't got the profits going to bottom lines to create wage improvements and bonuses."

What to do? "Gold's going higher, you can count on that," reckons Manduca.

"It's still cheap, in fact, relative both to its fundamentals and its historical price in real terms. [Plus] you can't trust what the politicians say. You can't trust the world's reserve currency, because you know its producer is promiscuous with its value. And you can't really trust debt any longer, either, the paper that someone gives you saying 'I owe you'."

What's more – "and people in the West forget this, they really do," said Manduca to Bloomberg – "hard assets is a very recent phenomena in terms of currency for those in Asia and in China in particular.

"What else could they own? What else could they trust in? Gold and silver were critical components of wealth, currency and barter in the recent past. I know it goes back three or four generations in the West, but it's immediately there in Asia, and as a consequence, they are hedging.

"The growth story is not here, [it's] in Asia," Manduca went on. "For investors trying to make a buck, and a quick buck at that, Asia's the place to be playing, not the West...[and] they are buying gold both at central bank level, wealth-fund level and, of course, amongst the population."

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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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