Gold Prices recovered their early losses on Wednesday to end London trade above $760 per ounce – up 0.7% from Tuesday – as US stocks fell hard on news that Merrill Lynch lost 46% more on subprime mortgage investments between June and Sept. than it originally stated three weeks ago.
"This is a bloodbath for certain," reckons Bill Fitzpatrick, analyst at JohnsonFamily Funds in Wisconsin, speaking to Reuters.
"It speaks very poorly to Merrill's risk management practices. Clearly, heads are going to roll, and I wouldn't be surprised to see meaningful near-term layoffs." (But is this latest subprime "bloodbath" really a surprise? Get the full story here...)
By lunchtime on Wall Street, the S&P index stood more than 1.5% lower. European stocks reversed their earlier gains to finish the day 0.5% down.
British investors wanting to Buy Gold Today saw the price recover £372 per ounce by the finish in London.
Gold Priced in Euros regained last week's 17-month closing high above €535 per ounce.
"Everyone is begging for another half-point cut by the Fed," said one senior broker to Bloomberg after US home sales for Sept. showed an 8% drop from August's sharp fall.
In the futures market, interest-rate prices are now virtually unanimous that the Federal Reserve will cut Dollar rates to 4.5% when it meets next Wednesday, Oct. 31.
But stacked against the hope of cheap money to bail out the US real estate and finance stock markets, crude oil prices snapped a three-day losing streak – rising from below $85 to $86.64 per barrel in New York – after a surprise drop in US stockpiles.
Oil imports sank by 13% last week the Energy Dept. said. Total crude supplies fell by 5.3 million barrels, a 1.7% drop.
Wall Street economists had expected a rise of nearly 1 million barrels.
"This is an exhibit of the tightness we've been talking about," says Rick Mueller, analyst at Energy Security Inc. in Massachusetts. "There just isn't enough oil out there and the situation won't be remedied until Opec opens the taps."
Also supporting today's strong move back into Gold Bullion Investment, a new report from the World Gold Council said that gold jewelry demand in the second quarter of 2007 hit a record value of $14.5 billion – up by more than one third from April-to-June last year.
"The new record was driven by two key factors," the WGC noted. "The economies of a number of gold's key markets, notably India, China and the Middle East were all strong, some very strong.
"The second factor was the substantial easing of price volatility from the first quarter."
Gold Price volatility so far this month has been blamed for a lackluster start to India's traditionally strong festival season, set to peak with the Diwali festival of light in early November.
But the World Gold Council's researchers in New Delhi still believe total imports may rise 17% for 2007 as a whole, hitting a record 840 tonnes for the year as local incomes continue to rise and the economy continues to surge ahead.
"I'm in the process of – I hope in the next few months – getting all of my assets out of US Dollars," announced Jim Rogers, legendary commodities investor and author of the best-selling Adventure Capitalist, at a meeting organized by ABN Amro in Amsterdam on Tuesday night.
China's Renminbi "is the best currency to buy right now," he went on. "I don't see how one can really lose in the next decade or so.
"It's gotta go. It's gotta triple. It's gotta quadruple."
Rogers is also buying agricultural investments after "the number of hectares devoted to wheat farming [globally] has been declining for 30 years and the inventory levels of food are at the lowest level since 1972."
He remains long of precious metals, not least gold, because "the US Dollar has been the world's reserve currency, but that's in the process of changing.
"It's the official policy of the central bank and the US to debase the currency."
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