Spot Gold Prices rose steadily throughout the Asian and early London sessions on Friday, before leaping at the US open to regain their highs of the month above $674 per ounce.
World stock markets also rallied strongly – and US Treasury bonds fell – on news that President Bush will today announce a rescue package for the subprime US housing market.
"The president wants to see as many homeowners who can stay in their homes with a little help be able to stay in their homes," a senior official told the Wall Street Journal.
"We're not looking for an industry bailout or a Wall Street bailout. The focus here is on the homeowner." (What might the turmoil in world credit markets mean for gold? Click here to read on...)
Today also brings a speech from Ben Bernanke, chairman of the US Federal Reserve, entitled 'Housing and Monetary Policy'. He's due to begin speaking at the Jackson Hole central banking summit at 13:00 GMT. The expected action and reassurances now due pushed US Treasury bonds – the "safe haven" of choice for large institutions during the turmoil of August – lower in price.
Indeed, "Treasuries should get shellacked now that Bush has proposed the nationalization of the subprime market," as Dan Denning of The Daily Reckoning Australia put it in a private note to BullionVault this morning.
Ten-year US yields rose 5 points to 4.56% overnight. Two-year US bond yields rose 10 points 4.20%. Overnight Dollar deposit rates in Tokyo jumped 45 points to 5.65%, while Gold Lease rates in London hit their highest level since Nov. 2003.
As money came out of US bonds, the Nikkei stock index in Tokyo closed 2.6% higher for the day, while Hong Kong reached a new lifetime high. Dow Jones index futures traded in Frankfurt rose to signal a 0.4% opening gain. Here in London, the FTSE100 put on 0.45% during the first hour of trade, even as Barclays – the UK's third largest bank – admitted it had to tap the Bank of England for an emergency $3.2 billion loan on Wednesday. It had already tapped the BoE for a $630 million loan last week.
In the Gold Market, Japanese gold futures traded at the Tocom for Aug. '08 delivery gained 1.1% to equal $673.90 per ounce, while the Yen continued to slip back on the currency markets. The Dollar rose to regain Monday's opening level of ¥116.30, but it slipped fast against the Euro to $1.3700. Sterling ran above $2.02 for the first time in more than two weeks.
That action helped the Sterling Price of Gold touch £334 per ounce, its best level since Aug. 16th. For French and German investors wanting to Buy Gold Today, the price reached €492, nearly €6 above last night's low.
"Risk minimization is the flavor of the month & will continue to be served until some certainty on the subprime fallout becomes apparent," says Brandon Lloyd in today's technical gold-market note from Mitsui. "Close attention will be on today's US inflation figures [reading 1.9% on the personal consumption deflator] as dealers look for further signals on what impact the subprime woes are having on the US economy."
The economy of India, meantime – where one in every five ounces of Physical Gold sold worldwide was bought in 2006 – continues to accelerate, according to data released this morning. GDP grew 9.3% in the second quarter of this year, outpacing the Jan. to Mar. period's 9.1% rate of growth.
"Asian growth and exchange-traded gold demand should prove a more lasting feature of the gold market," said Morgan Stanley in a report yesterday. "Much of the support from traditional demand-side fundamentals will persist, with new fundamentals pushing Gold Prices higher."