Thursday, March 19, 2009
Gold Prices continued to rise for US-Dollar investors early Thursday, hitting $951 an ounce in London’s wholesale market as the greenback fell vs. all asset classes.
World stock markets rose together with bonds, non-US currencies and all traded commodities after the Federal Reserve announced $1.25 trillion of “Quantitative Easing“, creating money to buy long-dated US Treasury bonds and government-backed US mortgage debt.
“USD getting destroyed. Hearing Asian central banks buying Euro,” said a London dealer to BullionVault this morning.
“Stops going off on topside,” he added, pointing to bearish bets on gold being wiped out as the rising price broke above traders’ stop-loss levels.
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Over on the currency markets – and for the first time since mid-Jan. – the Euro also jumped together with gold, adding to Wednesday’s record one-session leap and hitting a fresh 10-week high vs. the Dollar above $1.3680.
Crude oil broke above $51 per barrel. Copper jumped to a four-month high.
The Fed’s Nuclear Strike on US Treasury yields – which squished 30-year rates to new record lows – meantime rippled across government bond markets worldwide, with investors bidding up UK and German bonds so high, their 10-year debt yielded barely 3.0% by lunchtime in London.
“I am torn between deflation unleashed by a bursting credit bubble, and the inflationary pressures of the policy response,” writes James Montier, strategist with Albert Edwards at SocGen in London.
Trying to identify “cheap investment insurance” for clients this morning, Montier cites inflation-protected government TIPS as one possible solution. His “second inflation/deflation hedge” is gold.
“From an insurance point of view, most obviously…gold is the one currency that can’t be debased. Thus it provides a useful hedge against the return of [the Fed's] sort of beggar-thy-neighbor policy. In the event of significant prolonged deflation [on the other hand], what is left of our financial system is likely to collapse.
“Thus holding a money substitute isn’t such a bad idea against this cataclysmic outcome.”
This article was posted: Thursday, March 19, 2009 at 12:54 pm