Gold News

Gold Drops $40 in Two Hours, Fastest Plunge Since Dec. '08, as Stocks Sink on US Jobs Data

Gold Prices sank against all currencies as New York dealing began on Thursday, falling at their fastest pace since Dec. 2008 as world stock markets tumbled and the Euro fell to fresh 8-month lows vs. the Dollar.

Dropping $40 an ounce inside two hours, the Gold Price in Dollars fell to $1067.50 – a level last seen at the end of Nov., just before the Reserve Bank of India said it bought 200 tonnes of bullion from the IMF, sparking a record run of new all-time highs peaking at $1226.

The Gold Price in both Euros and Sterling also fell sharply but less severely, erasing all of this week's gains to date.

"Gold's status as safe haven will come into play at lower prices," said
a Hong Kong dealer this morning.

"Overly bearish can be as costly as overly
bullish."

"We saw a correction from [gold's] highs yesterday as people want to
wait for Friday's non-farm payrolls data," said Ronald Leung of Lee
Cheong Gold Dealers, also in Hong Kong, speaking to Reuters ahead of the London opening.

Thursday's plunge came after US data for last week showed a surprise jump in Initial Jobless Claims.

Friday brings Jan.'s much-anticipated Non-Farm Payrolls figure, previously forecast to show the first solid growth employment since Dec. 2007.

New York's S&P stock index lost 2% on today's jobs data. London's FTSE100 extended its drop to touch last week's 3-month low of 5,145.

On a technical analysis of the Gold Price chart, says Heraeus head of trading Wolfgang Wrzesniok-Rossbach, "There is good support at $1075 an ounce, and this would again be a good level for industrial buyers to stock up on the metal."

By late-afternoon in London on Thursday, the Gold Price in Dollars had bounced to $1074.

On the monetary policy front, meantime, "Credit conditions are likely to remain restrictive," said the Bank of England today as it held UK interest rates at their record low of 0.5% for the 11th month running.

Only once since 1951 has the Old Lady kept her main rate on hold for longer than 12 months.

"I prefer obviously that the banks are making money," said European Central Bank president Jean-Claude Trichet in Frankfurt, also holding rates steady at the Eurozone's record low of 1.0%.

"Because when the banks were losing money, it created a total catastrophe."

Neither the Bank of England nor ECB today extended or withdrew their "extraordinary" liquidity injections to the UK and Euro economies. Both said inflation is unlikely to rise as global growth remains weak.

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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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