Spot Gold Prices recovered an overnight dip early in London on Wednesday to near the new 16-month high they hit yesterday when the US Federal Reserve slashed the cost of borrowing Dollars.
"You can throw away your [technical] charts in these kind of market conditions," said one bullion dealer in Singapore to Reuters. "There's a chance we will see a new high this week.
"It was an aggressive move by the Fed to cut rates by 50 basis points to 4.75%. I think the US is in deep trouble. Gold should be your safe haven," he said.
While Spot Gold Prices jumped, gold futures for Dec. delivery leaped to a new 27-year high on the Fed's decision yesterday, gaining $11.70 – some 1.6% – to $735.50 per ounce.
According to Bloomberg data, that'd the highest price for the most-active gold futures contract since 11th Feb. 1980.
"Technically, gold looks set to test last year's $730 high in the short term," says Brandon Lloyd for Mitsui in Sydney this morning, "but it will potentially need to weather profit-taking following the overnight spike."
The Euro and crude oil also rose following the Fed announcement, and both went on to hit new record highs against the ailing Dollar with the European single currency jumping more than a cent to touch $1.3981. US light crude prices rose above $82 per barrel.
The British Pound, by contrast, gave back much of its Fed-driven spike by the start of London trade today, helping the Sterling Price of Gold recover above £361 per ounce.
For German and French investors looking to Buy Gold Today, the metal began the day in Frankfurt trading €1 either side of €518 per ounce.
"There's a strong possibility gold will reach $740 or $750 at the end of this month," reckons Yukuji Sonoda at Daiichi Commodities in Tokyo.
Japan's most-active Tocom gold futures contract rose more than 2.1% overnight. The Nikkei stock-market index put on 3.7%. The FTSE100 in London gapped up more than 100 points at today's open.
Short-term bond prices also continued to rise, but 10-year US Treasury debt was sold lower for the third session running as London got to work Wednesday.
"We see bond yields rising," says Yoshio Takahashi, a Tokyo strategist for Barclays Capital. "Market turmoil will calm down [but] the inflation risk will increase because of the big rate cut."
The difference between short-dated and 10-year bond yields has now widening to a 7-week gap. "This represents a classic steepening of the yield," notes Gerard Baker in today's London Times. "It may presage concerns about inflation risks – fuelled by concern that the Fed has dropped the inflationary ball."
Simply put, "the rate cut is inflationary," says Ron Goodis, futures director at Equidex Brokerage in Closter, New Jersey, "and money is flowing into gold as a hedge."