Spot Gold Prices rose strongly in late London trade on Tuesday, recovering an earlier dip to $724 per ounce and hitting new one-day highs against the ailing British Pound.
Already weakened by the run on a major mortgage lending bank, Northern Rock, two weeks ago, the Pound was hit on Tuesday by news that only £4.4 million ($8.8m) has been put aside in the Financial Compensation Scheme that underwrites the UK's cash savings.
In the United States, the equivalent fund holds 5,000 times as much money, for a nation only five times larger.
By 12:45 EST, the Gold Price in Sterling touched £363 per ounce, up more than 0.8% from the day's low.
Versus the US Dollar, the Gold Price touched $733 after slipping more than 1.2% ahead of today's Wall Street open.
US stock markets held flat after existing home sales data for Aug. came in as expected. Consumer confidence, however, sank to its lowest reading since late 2005.
Crude oil prices also sank, dropping below $79 per barrel after Ali al-Naimi – the Saudi oil minister – said "the [energy] market is in turmoil. Let's leave it at that."
He did, but oil traders didn't, spooked by a rebound in Gulf of Mexico production after tropical storms failed to dent output. But fresh risks of inflation came from the wheat market when Algeria bought 330,000 metric tons of wheat from the United States.
Wheat prices have now jumped by nearly 80% so far this year.
In the bond market, yields fell as Treasury prices rose on those weak US consumer numbers. Two-year US bond yields dropped 9 points to 3.95%. Ten-year yields, which had previously risen on fears of inflation hitting longer-date US Dollar assets, dropped 6 points.
"There is clearly a number of institutions that believe housing has more room to slow, and there is a relationship between a slowdown in housing and recessions," reckons Mustafa Chowdhury at Deutsche Bank in New York.
"What's not clear is how much is already priced into yields," he added. But what's "priced into yields" – recession or not – is the very real risk of soaring inflation.