Gold Prices hit new 27-year highs above $778 per ounce on Friday morning before dipping $2 in London after Asian stock markets leapt, bond prices rose, and oil prices surged on a fresh record low in the Dollar.
"Once the Fed meeting's over next Wednesday," reckons Yutaka Miura, a technical analyst at Shinko Securities in Tokyo, "things could well run out of steam, especially if they only cut overnight rates by 25 basis points as the market expects."
Note that word "only". After S&P and Moody's, the global ratings agencies, cut the credit-worthiness of debt issued by Merrill Lynch – the US bank hit by $7.9bn losses in housing-related debt – on Thursday, Fed futures now put the chance of a 50-point cut at more than one-in-seven.
Well over 8 in 10 interest-rate bets expect a cut of 25 basis points to 4.50% on Oct. 31st. Disappointment with Ben Bernanke's team when they vote on Halloween may see all "cheap money" trades take a hit.
The spot Gold Market has risen by nearly 18% since the Fed began slashing US interest rates on August 20th. Today in Tokyo the Nikkei rose 1.4%. The Shanghai stock market gained 0.5%, and Bombay's Sensex gained 2.5% to hit a new all-time high.
European stocks were mixed in morning trade, but US crude oil futures jumped for the third day running, gaining 1.4% on the front-month contract to race above $92 per barrel – more than 50% higher for 2007 so far – after Washington and London imposed new sanctions against Iran, demanding that Tehran stop developing nuclear technology.
"I'm very worried about Iran's nuclear progress," adds Ban Ki-moon, secretary-general of the United Nations, in an interview published by La Stampa in Rome today.
"I hope that, even with the change in negotiators, things can move forward. It is important to continue negotiating with Iran."
Brent crude in London also jumped to new record highs, while the US Dollar sank below $1.4360 per Euro.
The Gold Market, however, outpaced the gains in both crude oil and all major currencies.
Gold Priced in Euros rose 0.8% overnight to hit a new 17-month high at more than €543.50 per ounce. For British investors wanting to Buy Gold Today it came within 1% of the all-time highs hit above £380 per ounce in May 2006.
Canadian Gold Prices have now risen by more than 5.6% since the global "credit crunch" first hit at the start of August. The Aussie Dollar price has gained well over 10%.
For Indian consumers, gold has risen above 10,000 Rupees per 10 grams, the standard gold-dealing unit. "High prices have started to haunt the physical Gold Market as the quantity of buying drops," says Pradeep Unni at Vision Commodities in Dubai.
"Physical markets in India are only seeing normal buying activity ahead of Diwali," he tells Reuters, pointing to the mid-November festival when Hindus clean their homes and Buy Gold in the hope of a visit from Lakshmi, the goddess of wealth.
"Usually I like to buy something during Diwali for my daughters," said a New Delhi businessman to Reuters at the city's Karol Bagh market today. "But at these prices, I really should be selling some of my jewelry."
"Whoever wants to buy, will buy anyhow," disagreed another businessman. "I would buy the same amount even if prices were low."
Suresh Hundia, head of the Bombay Bullion Association, says that Indian consumers had previously hoped for a fall in Gold Prices ahead of Diwali.
"People have stepped back because of the high prices. Buyers may shrug off this phase as soon as prices start tapering," he says.
But Gold Prices have refused to back off, losing value only once on a weekly basis since the Federal Reserve began cutting US interest rates on Aug. 20th.
Western savers hoping to defend the value of their portfolios by Buying Gold on a pullback have also seen the price race ahead of them.
Significant dips have shown up, but only intra-day. Waiting for a pullback in September meant paying an 11% premium to buy at the end of the month. Holding off on a spot-gold purchase this month so far in Oct. would now mean another 4% price hike.