Gold News

Gold Price Hits New Record Highs as SocGen Scandal Deepens; US Home Sales Sink

Gold Prices hit a new all-time record high above $929 per ounce at the London close on Monday, gaining 1.8% from Friday's finish.

European stock markets ended the day lower as the scandal deepened at Societe Generale – France's second-largest bank – and sales of new homes in the United States showed a 26% fall for 2007 as a whole.

"The Fed seems to be suggesting that despite some of the [inflationary] price pressure, their concern is the financial system," says Stephen Platt at Archer Financial Services in Chicago.

"Gold is holding up as a flight-to-quality instrument."

Today in Paris it emerged that Societe Generale – which helped drag Europe's major stock markets almost 5% lower last week by closing out $7.1bn in equity-trade losses – was warned about "rogue trader" Jerome Kerviel in November.

"Questioned by the bank, he produced a fake document to justify the risk cover," according to state prosecutor Jean-Claude Marin. But with 2,600 risk-management professionals on its staff, SocGen's loss of credibility hammered the shares yet again, taking its losses to 28% over the last month alone.

The European single currency managed to ride-out the scandal, rising to a five-week high vs. the US Dollar above $1.4795.

That move failed to stop the Gold Price in Euros rising to a new record high of €628.60, however, and while the Pound Sterling was little changed for the day on the foreign exchanges, British investors looking to Buy Gold today saw the price move above £468 per ounce.

"We're seeing new longs coming into the market," one New York floor trader said to Dow Jones Newswires earlier, pointing to Monday's expiry of the February Comex gold futures contact.

"As February options are expiring," the newswire explains, "participants are trying to keep February gold futures contracts above $920 an ounce before they roll into April contracts."

Looking ahead, the Gold Market will be watching the Federal Reserve's scheduled interest-rate decision on Wednesday – widely expected to bring a 0.25% or even 0.50% cut.

"Gold is boosted by the expectation that the Fed will have to pick and choose between fighting inflation or fighting recession," said Wallace Ng, head of precious metals trading at Fortis Bank in Hong Kong, earlier today.

"Now it seems they have given up on inflation."

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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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