Gold News

Gold Price Drop "No Surprise" Amid Global Stock-Market & Commodity Plunge as Nuclear "Panic" Hits Tokyo

The Gold Price dropped 3% to four-week lows vs. a rising US Dollar on Tuesday morning, as world stock-market and commodity prices sank on worsening radiation leaks from north-east Japan's earthquake-hit nuclear plants.

The Nikkei ended Tuesday at a 22-month closing low, down nearly 11% for the day, as officials advised people within 30 miles of the Fukushima Daiichi facility to stay indoors.

Austria was reported to be moving its embassy south-west from Tokyo – which is some 150 miles from the stricken nuclear site – where supermarkets have been stripped bare of food, flashlights and daily necessities.

By lunchtime in Europe, Germany's Dax index slumped nearly 5% and London had lost 2.6%, falling to new 2011 lows.

The Gold Price in Euros, Sterling and Japanese Yen lost 2.0% overnight, falling towards 4-week lows.

Priced in US Dollars, the price of Gold Bullion bounced higher from $1384 as New York's stock markets opened the day nearly 3% down.

"Be it due to margin calls [on other assets] or risk averseness," says one Asian dealer, "the financial markets suffered a meltdown [that] spilled into the metals."

With Japanese car production still shut by the disaster, auto-catalyst metals platinum and palladium fell 2.3% and 3.9% by today's AM Fix in London, hitting fresh 2011 lows after what one Hong Kong trader called "panicky sales" by private investors in the Tokyo market.

Wholesale Silver Bullion prices fell through last Friday's trough of $34 per ounce to hit a two-week low, down more than 5% from the start of today's Asian trade.

"We saw not only selling of equities, but also panic-selling of gold, silver, platinum and palladium in Japan today," writes James Zhang at Standard Bank.

Brent crude meantime oil lost $4.75 per barrel to $109, leading a 2% drop in the broad commodity markets.

Amid the Japanese earthquake and nuclear shocks, Gold Investment "has not been acting as much as a safe haven as other safe-havens," notes Matthew Turner at Mitsubishi, "but it's also not been acting as much as a commodity as other commodities."
"It's not unusual for gold to tumble during initial episodes of a severe broad asset sell-off," adds Dr.Edel Tully at UBS, also quoted by Reuters.

Further ahead, "Friday’s disaster in Japan will be negative for economic growth," says Zhang at Standard Bank, and "a slump in growth in the world’s third-largest economy may have a substantial impact on the outlook for global monetary policy.

"It may move monetary tightening into the future. If so, it would be bullish for especially gold."

Major-economy government debt prices jumped as stock and commodity markets sank, driving 10-year US Treasury yields down more than 0.12% to a three-month low of 3.23%.

BNP Paribas analysts note today that Japan is China's top trading partner, accounting for 13% of imports, with hi-tech, plant and machinery dominating.

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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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