From Adrian Ash<\/p>\n
\nBullionVault<\/a><\/p>\n \nAs \u201cYear-End Liquidation\u201d & Rising Interest Rates Hit Commodities<\/strong><\/p>\n <\/strong><\/p>\n \nTHE PRICE OF GOLD<\/strong> continued to fall in Asia and London on Wednesday, dropping 2.8% from Tuesday’s new record high of $1430 per ounce as commodity markets also fell and global stock markets stalled.<\/p>\n \nCrude oil slipped further from yesterday’s new two-year highs, but major-economy government bonds also extended their losses, driving 10-year US Treasury yields above 3.20% even as the US Dollar rallied sharply on the forex market.<\/p>\n \nSpot-market silver bullion<\/a> prices lost more than 7% from yesterday’s new 30-year high above $30.70 per ounce.<\/p>\n \nThe gold price in Euros<\/a> unwound the last of Monday’s 1.9% surge to new record highs, trading back at last week’s finish beneath \u20ac33,900 per kilo, while the single currency dipped below $1.32 on the forex market.<\/p>\n \n\u201cInvestors [in base metals] are clearly taking profits after the latest high-altitude flight,\u201d reckons Commerzbank’s commodities team.<\/p>\n \n\u201cLiquidity is drying up before year-end, so even the most buoyant of asset classes, such as gold bullion<\/a>, are affected,\u201d says Jamie Spiteri, head of trading at Sydney’s Shaw Stockbroking.<\/p>\n \n\u201cSome investors who have sold their gold are buying back,\u201d a Hong Kong dealer told Reuters on Wednesday.<\/p>\n \n\u201cWe don’t see many people selling scrap gold.\u201d<\/p>\n \nScheduled to sell \u20ac5 billion in new government debt today, Berlin saw the yield on 10-year German Bunds rise to a 7-month high above 3.00% this morning.<\/p>\n \nIrish 10-year bond yields held steady above 8%, as the Dublin government won the first vote on its austerity budget announced Tuesday \u2013 needed to secure \u20ac85bn of emergency finance from Ireland’s EU partners and the Washington-based IMF amid what finance minister Lenihan calls the \u201cworst crisis in our history.\u201d<\/p>\n \nTen-year UK gilts also fell again in price, pushing their yield to new buyers above 3.50% for the first time since June.<\/p>\n \nUS Treasury bonds fell further too, as the tax-cut and jobless benefit extensions agreed by President Obama and Republican lawmakers late Monday night were estimated at \u201cbetween $700 billion and $800 billion if ultimately signed into law\u201d according to CNN Money.<\/p>\n \n\u201c[Coming as] Obama\u2019s deficit panel is trying to find ways to cut the $1.3trn budget deficit, [this] encourages the view that the Administration and Congress are not really interested in reducing the deficit,\u201d says Steven Barrow, chief currency strategist at Standard Bank.<\/p>\n \n\u201cThe Eurozone seems to be in a very different place with its over-zealous deficit-reduction ambitions. [But] one cost of this…is the prospect of haircuts on future debt as policymakers try to shift the burden [of repayments] away from taxpayers.\u201d<\/p>\n \nBack in the gold bullion<\/a> market, \u201cRecord highs gave way to massive liquidation on Tuesday,\u201d notes a London precious metals desk today, \u201cas New York turned a seller of bonds and commodities.\u201d<\/p>\n \nThe jump in 10-year US Treasury yields to 3.00% and above \u201cwas a good enough reason to liquidate positions heading into year end and the selling momentum [in gold bullion<\/a>] was massive.\u201d<\/p>\n \nTen-year US Treasury bond yields today rose 3.25%, their highest level since June.<\/p>\n \n\u201cAfter years of conveniently ignoring the issue and instead focusing efforts on pulverizing the Euro area, there appears to be a realization that the US has a massive Federal debt problem,\u201d says Marc Ostwald at Monument Securities in London.<\/p>\n \nCalling the Eurozone debt crisis a \u201cwork in progress\u201d, Ostwald believes that \u201cA test of the 30-year downtrend [in US bond yields and thus interest rates] looks likely to be broken, and a run up to test 5.0% [on the 10-year] will mark the start of a long-term bear trend [in bond prices]…not only in the USA but around most of the G7 and Eurozone.\u201d \nBullionVault<\/a><\/p>\n \nGold price chart, no delay<\/a> |\u00a0\u00a0 Buy gold online at live prices<\/a><\/p>\n \nFormerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash<\/strong> is the editor of Gold News<\/a> and head of research at BullionVault<\/a> \u2013 winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council<\/a> research body \u2013 where you can buy gold today<\/a> vaulted in Zurich on $3 spreads and 0.8% dealing fees.<\/p>\n
\nAdrian Ash<\/p>\n