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London Gold Market Report
08:30 EST, Mon 12 Oct.
Inflows to Gold “Speak for Themselves”, Financial Press Blames “Greater Fool Theory”
THE DOLLAR-PRICE OF GOLD ticked higher Monday morning in London, rising back through $1050 an ounce as world stock markets jumped and the Euro also gained vs. the Dollar.
Government bonds pushed higher, as did crude oil, base metals and soft commodities.
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These are the securities directly issued by the US Government which have the longest maturity (30years). The contracts are not quoted with decimals but with fractions. For instance, the prices soared during 2 months last year (November and December 2008, between points A and B on the chart) from 112 20/32 to 141 28/32.
As you know, bond prices move on the opposite direction of interest rates. In the real economy, there are of course other factors such as relative risk, expectations on degree of confidence that impact bond prices. But the surge in November and December last year corresponds to the time where the Fed smashed the interest rates to attempt boosting the economy.
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Similarly with other major indices in the world, the S&P 500 is currently running out of steam. The most popular benchmark of the US stock markets has posted a high at 1,040 points last Friday (point B on the chart). However the bullish trend initiated in March seems to be completed as the indicators argue now for a correction.
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In parallel with the stock markets, the commodities rally has reached its peak as the CRB Index posted a recent high at 269.18 points during the first fortnight of August. Actually the commodities benchmark has already retraced slightly as its current price is 249.63. That’s 7.3% lower than the high of August.
On the weekly chart, we see that despite the rebound generated in last March, only a small part of the huge decline occurred last year has been retraced…
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The Asian market places (except Japan) are most of the time much more volatile and choppy than the other big stock exchanges in the world. The bullish and bearish moves are often exaggerated as those markets are considered as emerging economies. The speculation is particularly impressive and generates quick double digits gains and losses through the indices.
A good example is the Hang Seng Index, the stock market index in Hong-Kong. When most of the major indices in the world have the same shape and typically the same timing for extreme highs and lows, the Hang Seng has a different chart.
Despite the historical high was posted in late October 2007 (point A on the chart, similarly to the other world major stock indices), the lowest point of the following decline was posted exactly one year later, in late October 2008 (while the other major stock indices posted their own lows in March 2009).
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