Spot Gold Prices hit a 5-day high in early New York trade on Wednesday, breaking above $660 per ounce as European stocks closed more than 1% higher, but US equities pulled back after strong initial gains.
"Investor sentiment is recovering this morning, with European equities higher, the US Dollar weaker and credit spreads narrower," said Michael Jansen, an analyst at J.P. Morgan, to AFX.
Comex gold futures for Dec. '07 rose above $671 per ounce, a three-session high, as the Euro spiked to $1.3550 in the currency market, and the Pound Sterling rose by more than a cent to $1.9920.
The Dollar's decline on the foreign exchange market helped keep the Euro Price of Gold just north of €488 per ounce. For British investors wanting to Buy Gold Today, the price was capped at £332 per ounce by the London close.
"The gold price has stabilized, and the market has flushed out all the speculators," reckons Marty McNeill, a trader at New York's R.F. Lafferty Inc.
In the US Treasury market, the huge inflows of 'safe haven' money seen on Black Monday this week retreated, pushing bond yields sharply higher. Two-year US bond yields rose 15 points to 4.15% by lunchtime in New York. Ten-year yields climbed 7 points to 4.65%.
As bond prices slipped and yields rose, futures traders reduced their bet that the US Federal Reserve will cut its rates futures at its next policy meeting, Sept. 18th. The likelihood of a "desperate remedy" move from the current 5.25% to 4.75% in one fell swoop dropped from seven-in-ten to six-in-ten.
"The big story is that during last week's roller-coaster ride in the equity markets, people got scared into Treasuries and not metals like silver and gold, which are traditionally believed to be safe-haven investments," notes Ralph Preston, a senior market analyst at Heritage West Financial in San Diego, to Bloomberg. "Technically, gold and silver look weak."
But just because the world's largest financial institutions fled into Treasury bonds, that doesn't make US government debt – nor the US Dollar itself – a safe place for your money today.
These are the very organizations whose high-risk lending and credit strategies created this month's "crunch" in the world's equity and money markets.
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