FXstreet.com

0

0

London Gold Market Report

Mon, Sep 29 2008, 12:43 GMT
by Adrian Ash

BullionVault.com


Gold: Institutions & Private Banks "Will Reconsider Strategy" as Financial Crisis Hits Belgium, Germany, Iceland and UK

SPOT GOLD BULLION PRICES recovered an early 1% dip vs. the Dollar and leapt against other key currencies on Monday, as a wave of bank failures and emergency rescues across Europe drove Treasury bond prices higher, forcing the yield offered to new buyers still further below the rate of inflation.

World stock markets sank, cutting 3% off European blue-chips and driving Tokyo's Nikkei index towards fresh three-year lows, while the price of crude oil slid more than $4 per barrel to $102.70 amid the panic.

"Despite the [$700bn] US Bail-Out Plan now being committed to paper," said one London analyst to Reuters, "there's hardly a jubilant mood.

"The fact the funds won't be released in one lot but instead in a series of tranches is certainly detracting from its appeal."

Here in the United Kingdom, the government seizure of Bradford & Bingley – a major player in "buy-to-let" investment mortgages – sent London's banking sector plunging as the Chancellor, Alistair Darling, told the BBC that its competitors will now have to fund the shortfall in state-guaranteed insurance of deposit accounts.

The second nationalization of a UK bank in 12 months emptied the government's Financial Compensation Scheme of £12 billion ($21.5bn) – and required an extra £4bn from the Treasury – to smooth the sale of B&B's deposit business to Santander of Spain.

On the currency markets today, the British Pound tumbled to its worst intra-day losses since 1993, down almost 5¢ vs. the Dollar to a one-week low of $1.7960.

The Gold Price in Sterling leapt to a fresh six-month high, up 3.6% in morning trade to stand just 4% off its all-time high of £512 an ounce, reached in mid-March this year.

For French, German and Italian investors, the price of Gold gained 2.9% from Friday's close – touching €619 an ounce as the single currency dropped 1.3% vs. the Dollar – after the near-failure of Belgian-based Eurozone giant, Fortis.

The governments of Belgium, Netherlands and Luxembourg pumped €11.2 billion into the banking and insurance group, taking a 49% stake in return.

Germany's second-largest commercial real estate lender, Hypo Real Estate, secured a fresh line of €35 billion in government and emergency bank credit. Its stock sank 61% on the news.

The Icelandic Krona dumped almost 7% against the US Dollar after the Reykjavik government bought a 75% stake of Glitnir, the country's third-largest bank.

America's sixth-largest bank, Wachovia, was said by the New York Times to be seeking a sale to Citigroup or Wells Fargo.

"Institutional investors and private banks in particular will all be reconsidering their strategy. My belief is they are likely to want to own some gold again," said Jeremy Charles, head of precious metals trading at HSBC and chairman of London Bullion Market Association, to Reuters earlier.

Speaking at the LBMA's annual conference – this year held in Kyoto, Japan – Charles told the newswire that he sees only a 10% potential drop in Gold Prices right now, with " far greater potential on the upside.

Pointing to the Gold Coin Shortage that's hit retail gold investors worldwide since July, "the [soaring] premiums around the world tell a big story to me," he went on.

"The recent dip in the Gold Price has created massive demand from the retail investors."

Meantime in the paper promises of Gold Futures and options, speculative gold traders are being forced to close their positions due to the dearth of credit and surging financing costs.

Open interest in Comex gold contracts shrank by 6.5% in the week to last Tuesday, according to US regulator the Commodities Futures Trading Comission (CFTC).

The latest data also shows that hedge funds and other "large speculators" – hit by soaring financing costs and margin requirements as financial credit dries up – grew their long positions by just 6% as the price leapt $110 per ounce between 15th and 22nd Sept.

Previously taking their most "bearish" stance overall so far this decade early this month, hedge-fund and institutional traders were forced to slash their short position by a massive 37% as the Gold Price jumped from $780 to $890 an ounce.


Archive

BullionVault  | 2 King Street Cloisters, London W6 0GY
http://www.bullionvault.com/ | info@bullionvault.com

Legal disclaimer and risk disclosure

(c) BullionVault 2008 Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Related reports

Daily Global Commentary - What's so Paradoxical about Thrift? by Northern Trust
Tue, Dec 2 2008, 22:21 GMT

Daily Forex Technical Report by ActionForex.com
Tue, Dec 2 2008, 15:26 GMT

London Gold Market Report by BullionVault.com
Tue, Dec 2 2008, 12:34 GMT

Flash Comment - USA: Bernanke ready to take further steps by Danske Bank A/S
Tue, Dec 2 2008, 11:27 GMT

USA: NBER Recession Call by Wachovia
Tue, Dec 2 2008, 10:54 GMT

island, usd, us, gold

View All

Related content

UPDATE 1-GMAC forgives some of ResCap's debt
Thomson Financial News | Wed, Dec 3 2008, 00:03 GMT

UPDATE 2-US Senate leader Reid to offer auto bill Monday
Thomson Financial News | Wed, Dec 3 2008, 00:00 GMT

UPDATE 1-Chevron may sell refineries to optimize busines -exec
Thomson Financial News | Tue, Dec 2 2008, 23:43 GMT

UPDATE 1-New York Times sees charge for unit closing
Thomson Financial News | Tue, Dec 2 2008, 23:36 GMT

FACTBOX-U.S. Fed policy-makers' recent comments
Thomson Financial News | Tue, Dec 2 2008, 23:18 GMT

island, usd, us, gold

View All

Interested in forex trading? forex brokerage firms!


Forex Capital Markets, LLC (FXCM)
Contact the broker/FDM
Open a demo account
Interbank FX, LLC
Contact the broker/FDM
Open a demo account
Saxo Bank A/S
Contact the broker/FDM
Open a demo account
GFT
Contact the broker/FDM
Open a demo account
NordMarkets.com
Contact the broker/FDM
Open a demo account

FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)

[Read Premium full description]

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2008 "FXstreet.com. The Forex Market" All Rights Reserved.