Gold News

Gold Closes Monday Unchanged as Silver Drops 2%, Platinum Loses $60 on Global Equities Rout

From Chris Mullen at GoldSeek.com...

Gold Prices soared over 3% early Monday to touch $1031.85 per ounce in Asian trade before dropping back near unchanged as Wall Street opened and the global stock-market rout reached New York.

The Gold Market then rallied to about $1015 by late morning, but it fell back off into the close and ended with a gain of 0.35% from Friday's finish.

Silver rose to $21.34 in Asia before it dropped to $19.91 by about 9:30AM EST and then rebounded to about $20.70 by late morning, but it also fell back off into the close and ended with a loss of 1.9%.

The dramatic action came as some traders tried to get in to metals on a safety bid while others got out on margin calls that force them to liquidate profitable positions in order to cover losses in other areas. When all was said and done, spot gold did end at a new all-time high, ending above $1,000 for the first time ever.

The Gold Price in Euros fell to about €637 on Euro strength, however, while platinum lost $60 to $2010, and copper fell over 13 cents to about $3.71.

Gold and silver equities saw slight gains in morning trade before they fell to trade nearly 5% lower by mid-afternoon, but they then rallied back higher into the close and ended with only about 2% losses.

Crude oil neared $112 overnight, but it then tumbled as much as $6 as investors liquidated profitable positions to cover for losses in stocks. Fears over a recession that would cut into energy demand also added to selling pressure.

The US Dollar index plummeted to a new all-time low of 70.70 soon after the Bear Stearns news hit Sunday night, but speculation over the size of Tuesday's interest rate cut – plus rumors of coordinated central bank intervention to stem the Dollar's dramatic slide – pared the index's losses by the close and it ended just slightly lower.

"You cannot and will not preserve the purchasing power of a currency by expanding the monetary base at an 18% annualized rate," says Peter Spina of GoldForecaster.com.

"But that route has been taken and the sacrifice of the US Dollar will be one of the many victims of such a policy. So when mass consciousness accepts that their paper Dollars, Euros, etc are nothing more than fool's gold, there will be a stampede back into history's only true gold standard.

"We are at point where gold could become even more explosive. Short-term moves could amaze even some of the more bullish observers. Yet one should not discount a sizeable pullback either. Volatility is explosive and overall risks to the market remain to the upside, especially when taking a mid-to-longer-term view."

Treasuries rose Monday as the Dow, Nasdaq, and S&P fell on worries over the stability of the financial system. The Dow however closed slightly higher thanks to having J.P.Morgan, lucky buyer of Bear Stearns, as one its 30 components.

JPM's stock gained 10% on Monday after it bought Bear Stearns, the world's ninth largest bank, for just $2 per share – barely 1% of its year-ago stock market value – with the aid of a $30bn Fed loan.

The Fed's other action on Sunday – declaring "they will lend on any collateral (which means no collateral in real value terms) to investment banks as well as commercial banks – only institutionalizes what the Fed has been doing since all this started," says Jim Sinclair of JSMineset.com.

On the economic front, Monday's data showed manufacturing in New York state sinking this month, with the NY Index plunging to a record negative of -22.2 from -11.7 in Feb., way below forecasts of -7.4.

Net foreign purchases of US asset came in stronger than expected for Jan. at $62 billion, but capacity utilization showed more slack in Feb., when industrial production also slipped once again.

The National Association of US Home Builders reported its sentiment survey, which remained near its record low in March. Tuesday brings the Fed's highly anticipated interest rate decision at 19:15 GMT, preceded by Producer Price Inflation data for last month – forecast to show a 0.3% rise month-on-month – plus new US housing construction starts for Feb., plus Building Permits.

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Adrian Ash

Adrian Ash, BullionVault Gold News

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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