Gold Hits All-Time Dollar High, Reaches €700 on Aussie Rate-Hike & "Secret" Oil Trading Claims
Spot Gold traded wholesale by professional dealers worldwide leapt on Tuesday morning, recording its third-highest London Fix ever before rising further and touching its all-time intraday high for US-Dollar investors at $1032 an ounce.
The Euro also jumped, reaching a two-week high above $1.4740 after a UK newspaper claimed that the Opec oil cartel and Russia are working with China, Japan and France to sidestep the US Dollar in settling oil payments.
Government bonds were little changed as European stock markets rose 1.5%, driven higher by mining stocks.
The GSCI commodities index leapt 1.7%. Crude oil rose back above $71 per barrel.
"With the Dollar remaining the dominant force driving prices, gold's relationship to its fundamentals remains very much at arm's length," says Manqoba Madinane at Standard Bank, pointing to "weak global fabrication demand."
"The main thing is the weaker US Dollar and India is reporting increased demand," said an Asian trader to Reuters this morning.
But Eurozone investors now Ready to Buy Gold also saw the price jump early Tuesday, briefly reaching Sept.'s six-month high at €700 an ounce.
The Gold Price in British Pounds jumped 1.6% to £645 an ounce, its best level since late March.
Citing "both Gulf Arab and Chinese banking sources in Hong Kong", London's Independent newspaper today ran a front-page splash claiming that China, Russia, Japan and France have held secret talks to stop using the US currency for trading oil.
"[They will move] instead to a basket of currencies including the Japanese Yen and Chinese Yuan, the Euro, Gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar," says Robert Fisk, The Independent's Middle East politics correspondent.
The central banks named were quick to deny the report, with Saudi central-bank chief Muhammad al-Jasser calling the article "absolutely wrong".
"This is not new news of course," writes Dennis Gartman of the eponymous $5,000 advisory letter, "[but] this is not The Sun nor the New York Post. We suspect that the leaks made to The Independent are to be taken quite seriously.
"Certainly the markets are taking it as such, and we should also."
Oil analysts at Petromatrix called the article "loosely written", however, while BNP Paribas noted that Russia first proposed non-Dollar oil settlement in 2003.
BarCap in London says its Middle East team expect the single Gulf currency to be postponed beyond 2010, and "The plan would be completely nonsensical," says Commerzbank.
"Who would be in a position to set the weighting of such a synthetic 'oil trading currency' in a binding way?"
"Any shift will be subtle and never formalized to the extent to disrupt markedly the value of the Dollar," notes Bank of Tokyo-Mitsubishi's London office in a note, also quoted by the Financial Times.
"Oil-producing nations hold trillions of dollars in reserves and sovereign wealth funds."
On the official policy front today, "The basis for such a low interest rate setting has now passed," said Reserve Bank of Australia governor Glenn Stevens this morning, surprising the currency market with a 0.25% rate-hike to 3.25%.
Only one out of 20 economists surveyed by Bloomberg News anticipated the move. The Aussie Dollar rose 1.5% vs. the US currency, touching new 14-month highs.
The Aussie Gold Price recovered an initial A$15 plunge to trade unchanged on the day at A$1,159 an ounce – some 25% below its peak of Feb. this year.
"It's quite a pre-emptive move," reckons Su-Lin Ong, an economist at RBC Capital Markets in Sydney. "The Reserve Bank is very comfortable the globe is returning to firmer growth."
But "There's a lot of risk going ahead," said Nobel-laureate economist Joseph Stiglitz in an interview with Bloomberg TV from Istanbul yesterday.
"There's a very big risk that markets have been irrationally exuberant."
Citing last week's worse-than-expected US jobs data. "It's pretty clear that the [economic] situation will continue to get worse," he said.
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