Gold News

Spot gold prices end London above $701 as US and UK equities drop once again

Spot Gold Prices pulled back in Europe on Monday, ending the session at $701.50 per ounce after recording the highest London Fix to begin the week since Sept. 1980.

The PM Fix came in at $703.50, beating the weekly starts seen either side of the sharp Spike in Spot Gold Prices of May 2006.

London's equity market meantime ended the day nearly 1% lower and Wall Street's major index – the S&P 500 – dropped more than 0.6% by lunchtime in New York, despite a fresh injection of $2.75 billion into the US money markets from the Federal Reserve.

The Fed is widely expected to cut its main interest rate from 5.25% when it meets on Sept. 18th. Thanks to the new liquidity it added today, market rates now put the price of Dollars at 5.00%.

"We believe that we are seeing the reemergence of gold as a safe-haven asset," said a note from J.P. Morgan Securities today, "which if true implies that the recent Correlation between Equities and Spot Gold will break down."

Gold had been moving in lockstep with the US stock market as recently as May. Since the credit crunch hitting world money markets began knocking more than 8% off US shares in mid-July, however, the Price of Gold has risen by 2.3%. It's up by 10% since the start of this year.

"Gold is set to remain strong around $700 as a pivot level," reckons Frederic Panizzutti at MKS Finance. "The currencies have enabled gold to take off and the metal has now uncoupled from them. We are again running into a self-motivated trend where buying attracts buying."

The Price of Gold in Euros today ended the London session above €508 per ounce, a gain of nearly 3% from this time last week. For British investors wanting to Buy Gold Today, the price has risen almost 4% to £346.

"The move has been impressive and we might see some profit taking," Panizzutti told Reuters earlier, "but the market is definitely aiming for $720 as the next target. We expect the market to remain volatile in the coming days and would not be surprised to see another rally."

In the broader commodities complex, the price of copper, zinc and crude oil fell back, with traders citing Friday's woeful US jobs data as proof that the world's largest single economy is slowing down, cutting demand for industrial resources.

"The oil market is reacting to the economic uncertainty and worries about what that will mean for demand," said one energy analyst to Bloomberg. "The OPEC meeting [expected to cap the oil cartel's output to support prices] has already been priced in."

US bonds rose, meantime – and despite mounting evidence of sustained Inflation in the Cost of Food Worldwide – after president of the San Francisco Federal Reserve Janet Yellen told a conference that the US economy is under "downward pressure" from the credit crunch in financial markets.

Bond yields fell as prices rose, taking the two-year US Treasury yield down to its lowest level since Sept. 2005 at 3.83%.

"Classic paintings, gem stones, diamonds, collectibles, seaside real estate and gold are rising steadily in terms of paper," says Richard Russell, veteran analyst and editor of the highly respected Dow Theory Letter since 1958. "The incredible fraud of fiat currency goes on and on. It will continue on until well, until it morphs into dreaded hyper-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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