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Gold Gains 4.3% as Stocks, Oil, Silver, Currencies & Platinum Sink on Failed US Bail-Out Vote

From Chris Mullen at and Adrian Ash at BullionVault...

Gold fell $16.90 to $866.50 by late trade in Asia on Monday, before rising $23.65 to $907.05 by 10:00am in New York as European stock markets neared the day's close more than 5% lower following a raft of banking failures, bail-outs and rescues from Germany to London and Iceland.

Wall Street then sank on news that the Treasury's $700bn Bail-Out Plan failed to gain lawmakers' approval by 228 votes against to 205 for.

A new deal may be worked out soon, but due to Jewish holidays the next potential vote will not come until at least Thursday.

Gold Bullion moderated into the close, while the Dow Jones index closed 750 points lower – its worst one-day points loss in history – but the metal still ended with a gain of 0.65%.

Gold Prices then leapt again after the S&P500 index closed out its worst day since Black Monday 1987. Bullion reached $924 an ounce before settling nearer $910, up more than 4.3% from the overnight start.

The US Dollar index had risen on the stock market sell-off's accompanying “safe haven” panic, plus the prospect that it is not the worst currency in the world. For European investors, the Gold Price gained more than 4.5% from Friday' close.

The Gold Price in Sterling came within £3 of a new all-time record at £510 an ounce as the British Pound sank on a new nationalization of a major mortgage bank.

The Dollar ended well off its highs after the failure of the bailout plan, but it still ended with a modest gain. Everything else besides Treasuries fell, with US government 10-year bond yields pushed down 0.27% to 3.58%, almost 2% below the latest reading of US consumer-price inflation.

As if there weren’t much else going on today, Citigroup took over Wachovia in yet another “firesale” banking absorption. Crude oil fell over 10% on demand worries as it became obvious the financial crisis is hurting other world markets. Silver fell to $12.63 before bouncing but ending with a loss of 3.47%.

Platinum lost $14 to $1081.50, and copper dropped nearly 17 cents to about $2.92.

Gold Mining and silver mining equities fell over 4% by early afternoon before they rebounded in the last couple of hours of trade, but they still ended with over 2% losses as roughly 8% losses in the Dow and other major indices overcame the higher Gold Price.

Also making headlines – but failing to avert the fresh collapse in stock prices – the Federal Reserve significantly expanded the availability of cash to financial institutions, effectively doubling the total amount of loaned cash available to $225 billion.

Moreover, the Fed also made an extra $330 billion available to other central banks, more than doubling to $620bn the total amount available through currency "swap" arrangements aimed at easing Dollar supplies in European money markets.

“When you have a slowdown of credit creation you have a liquidity crisis,” says Peter Spina of, “and as the crisis accelerates to new levels, more desperate actions are being taken.

“The US Dollar has been sentenced to death. Only the execution date is yet to be announced.”

Relatively insignificant in cash terms, but certainly noteworthy as a political move, the US Senate also approved $25 billion in loan guarantees for the financially strapped US auto industry.

Tuesday at 09:45 EST brings Chicago PMI for Sept., expected at 54.0, followed at 10:00 EST by Consumer Confidence, expected at 55.0.

Chris Mullen is chief content manager of the GoldSeek family of websites, a leading source of gold news, comment and mining-stock data for private and institutional investors.

See the full archive of Chris Mullen articles


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