Gold: Dubai "Debt Freeze" & Central-Bank Buying Send Gold to Yet Another USD, Euro & GBP High
Gold jumped once again early Thursday, hitting its 17th new all-time high in 13 days at the London Fix, while financial assets fell worldwide on news of a "debt freeze" by the United Arab Emirates' Dubai World.
The state-owned investor behind luxury developments such as the World and Palm man-made islands – and owner of the world's largest privately held real-estate company, Nakheel – Dubai World asked for the 6-month repayment delay on the eve of Eid, the Islamic festival which will see UAE markets closed for two of the next three sessions.
Dubai World's bond prices sank as Moody's Investors Service downgraded the debt of all six of Dubai's government-related issuers (GRIs) below A-grade. The emirate's authorities said Thursday morning they would step in to support
"only those companies with viable long-term business prospects."
Indonesia's Islamic sukkuk bonds fell hard alongside Malaysia's national oil company Petronas, notes the AFP newswire. Crude oil also dropped, as did non-Dollar currencies and stock markets from Tokyo to Paris.
Hit by its worst one-day drop in a month, the London Stock Exchange was further hit by "technical difficulties" which disrupted pricing and dealing.
The British Pound unwound this week's 2.5¢ gain vs. the Dollar – and dropped to a one-month low vs. the Euro – due to what analysts called "jitters" over the City of London's exposure to Middle East finance.
The London Stock Exchange itself is 20% owned by Dubai Bourse, a state-owned holding company.
The US Dollar meantime bounced from a 14-year low to the Japanese Yen, rising from ¥86.30, while gold priced in British Pounds jumped to fresh all-time highs above £719 an ounce, more than 13% higher for Nov. so far.
The Gold Price in Euros also gained, hitting a new record London Fix at €784 but retreating from near all-time intraday highs at €791.20.
"Momentum on gold is building now, as latecomers climb on the bandwagon," writes former arbitrage trader, Forbes national and Wall Street editor Robert Lenzner.
"It will continue rising until there is a concerted move by central banks to defend the Dollar, and that is not likely.
"Gold is going into strong hands like hedge funds managed by...the cream of the crop [and] public institutions like central banks in India and China."
"Everybody is bullish on Gold, and everybody is looking at the signal central banks are sending," agrees Dick Poon, precious metals manager at German refining group Heraeus' office in Hong Kong.
"It's not just India or China, but most of the central banks, as well as funds, have changed their portfolios to include gold. So, everybody is looking at how much money they will invest in gold."
Wednesday saw the central bank of Sri Lanka announce that it bought 10 tonnes of Gold Bullion – worth $375 million – from the International Monetary Fund (IMF) on Monday.
Adding to the five tonnes bought in the open market last month, "We see gold as an important anchor and a hedge to have in times of volatile currency market," governor Nivard Cabraal told the AFP newswire.
"We think it's a good time to buy."
With New York's financial markets effectively shut until Monday for the Thanksgiving weekend, European government bonds rose on Thursday, pushing the yield offered by 10-year German Bunds down to 3.21%.
Crude oil dropped back through $77 per barrel, but the broader commodities markets rose as food prices leapt.
Japan's deputy finance minister Yoshihiko Noda told Reuters that "We are not considering intervention right now" to support the US Dollar and depress the Yen, but "This Yen strengthening is caused by Dollar selling rather than Yen buying, so this is not something Japan can handle by itself" anyway according to Yutaka Miura, Mizuho Securities' senior technical analyst in Tokyo.
Money-supply growth in the 16-nation Eurozone held at 1.8% year-on-year in October, the European Central Bank said today.
That beat analyst forecasts of an all-time 0.7% low, but compares with the three-decade record of 12.3% set at the start of 2008.
The Bundesbank today told German banks to raise capital and "take advantage of renewed confidence," as The Daily Telegraph reports, before write-downs of between €50 and €70 billion hit in 2010.
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