Gold News

Gold Bounces to End Weds 2.2% Lower; ECB Set to Join US Fed in Cutting Interest Rates

From Chris Mullen at

Gold Prices fell over $20 an ounce to $878.08 by early trade in London on Wednesday, and then rallied back near unchanged by 10:00 in New York.

The Gold Market then fell to a new low for the week of $876.70, but rallied into the close to end with a loss of 2.2%.

Silver fell to $15.67 and rose to $16.14 before it fell back to $15.72, but it also bounced higher into the close and ended off its low with a loss of 2.59%.

The Gold Price in Euros also fell but held above €600 per ounce, platinum lost $17 to $1559, palladium lost $7 to $371, and copper fell nearly 7 cents to about $3.17.

Gold and silver mining equities fell more than 5% by late morning on Wall Street before they rebounded to end with 4% losses for the session.

On the economic front, the US Federal Reserve's Beige Book of data noted the economy expanded modestly at the end of 2007, but at a slower pace than the slow pace noted last time.

Tighter credit standards, moderate wage increases, the weaker Dollar and weak residential AND commercial real estate were among the other factors that do not change the outlook for a 50-basis point rate cut to the key US interest rates when the Fed meets on Jan. 30th. Inflation still does not appear to be an issue for the world's most powerful central bank, despite a rise in Consumer Price Inflation reported Wednesday for Dec.

Thursday at 08:30 EST brings Housing Starts for December, Building Permits, and Initial Jobless Claims for the week-ending last Friday. At noon comes the Philadelphia Fed survey for January, expected at -1.5.

Ben Bernanke, chairman of the Federal Reserve, also testifies before the House Budget Committee.

In the broader markets yesterday, crude oil fell below $90 per barrel after US inventory data came in better than expected, but the energy markets did end well of their lows with a loss of only about a dollar on speculation that the recent correction from $100 a couple of weeks ago may be overdone.

Crude inventories built 4.3 million barrels, gasoline inventories built 2.2 million barrels, and distillates built 1.1 million barrels, but refinery utilization surprisingly fell 4.2% to 87.1% to add at least one bullish note to the report for oil traders.

In the currency market the US Dollar index did not react much to either the CPI inflation data, nor the weak Net Foreign Purchases of US securities data ($90.9bn for Nov. vs. $114.0bn in Oct.). The Dollar then took off to find decent gains after a governor of the European Central Bank said the ECB may revise its growth forecast lower, shifting expectations for Eurozone interest rates to remain on hold.

US Treasury bonds rose in early trade as the major stock-market indices fell markedly again, but bonds then fell back off and ended lower. Disappointing results from Intel failed to prevent a late bounce, helping the Dow finish only modestly lower for the day.

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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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