Gold News

Gold Ends Thurs at New 27-Year Closing High; Bonds Rise, Stocks Fall on Fed Speech

From Chris Mullen at GoldSeek.com...

Gold Prices fell slightly in mixed trade in Asia on Thursday, dropping as low as $826.85 before rebounding in London.

The Gold Market found gains of $15 by late morning in New York, spiking on a speech by Ben Bernanke, head of the US central bank, that warned of both inflation and an economic slowdown ahead.

Bernanke spoke before the joint economic committee and his testimony was overall taken to be dovish and supportive of another interest rate cut at the Fed’s next meeting on December 11th as he noted “sluggish” US growth.

As a result the chances for a Fed rate cut at their next meeting went from 80-85% in the futures market before his testimony to 115% after. Some traders are looking for more than just a 25-basis point cut.

Spot Gold Prices ended with a gain of 0.54% at a new 27-year high. Gold futures also surged, hitting a new record closing high.

Silver fell to as low as $14.92 in Asia before it rose to as high as $15.802 by about noontime in New York, but it also sold off markedly in the last couple hours of trade and dropped to $15.37 before it bounced back higher in the last 15 minutes of trade and ended with a gain of 1.18% at a new 27-year high.

Gold Priced in Euros remained at a record high above €568, platinum gained $4 to $1460, palladium remained unchanged at $372, and copper fell nearly 5 cents to about $3.27.

Gold and silver mining equities rose over 2% in the first 5 minutes of trade before they were dragged lower by general market weakness for most of the rest of day and saw about 1% losses by early afternoon, but they then rallied back higher in the last hour of trade and ended mixed and near unchanged.

Friday at 12:30 GMT brings US Import & Export Prices for Oct., plus the Trade Balance for Sept. – expected at -$58.5 billion. Then comes the preliminary reading for Michigan Sentiment expected at 80.0.

Crude oil rose in early trade on geopolitical issues, a storm brewing in the North Sea, and a fire at a Bolero refinery in Texas. But gains turned to losses in later trade after US natural gas stocks were reported to be 36 billion cubic feet greater than at last counter. Bernanke’s dovish outlook also suggested weaker demand going forward.

The US Dollar index ended off its lows but still reached a new record low. Bernanke's comments also sent Treasury bond prices higher while the yield on the 10-year fell under 4.275% for the first time in over two years.

The Dow and S&P fell for most of trade on mixed retail sales reports and more credit worries. The Nasdaq was especially hit as Cisco noted a falloff in orders from US financial institutions in its earnings report. This was discouraging to many as they previously believed the tech sector would remain immune to recent and ongoing problems in the credit market.

The Dow and S&P were on track for the biggest 2 day decline since 2003, but out of nowhere they rallied back higher in the last hour of trade and ended only slightly lower. The Nasdaq closed off its lows but still scored its biggest 2-day decline since 2002.

"Integrity in our financial institutions and confidence in the US Dollar are falling quickly," warns Peter Spina of The GoldForecaster.com. "Restoring confidence is very difficult to undertake with current circumstances, and the result is greater interest in real money.

"Gold's integrity does not need to be questioned and that brings a level of confidence the US Dollar simply cannot produce as it loses its global appeal. Over the coming days and weeks, I would expect an attempt to stabilize the situation – because at the current moment, it appears to be getting out of control.

"The big question on my mind is: Are the mechanisms of control used to stabilize situations able to do so at this time? Or is the situation so much larger that it is at the mercy of the free markets forces?

"This is not a time I would want to be short gold or out of gold. Times like these are precisely the reason investors have gold and silver in their portfolios. It is an insurance policy against the very circumstances we are witnessing at this time."

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Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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