From Adrian Ash<\/p>\n
\nBullionVault<\/a><\/p>\n \n\u201cHeadline-Led\u201d as Euro Falls on Debt Warning<\/strong><\/p>\n <\/strong><\/p>\n \nTHE PRICE OF GOLD <\/strong>slipped to a two-day low in London on Wednesday morning, dropping 1.5% from yesterday\u2019s Dollar high at $1408 per ounce as Asian stock markets closed up to 2% lower and European stocks lost 0.7% on average.<\/p>\n \nThe fall in gold prices \u2013 and a rise in the Dollar\u2019s forex value \u2013 came despite the US Federal Reserve last night vowing to continue its $75 billion per month quantitative easing and keep interest rates at \u201cexceptionally low levels\u2026for an extended period\u201d even in the face of strong retail-sales and factory-gate inflation data.<\/p>\n \nWednesday brought new figures saying US consumer prices rose faster than expected last month, up 0.8% year-on-year when fuel and food costs are excluded \u2013 the Fed\u2019s preferred measure of inflation.<\/p>\n \nThe 16-nation Euro currency meantime dipped through $1.33 \u2013 holding the gold price in Euros above \u20ac33,500 per kilo \u2013 after the Moody\u2019s rating agency caught up with its competitor Standard & Poor\u2019s and put Spain\u2019s government debt on \u201cnegative watch\u201d.<\/p>\n \nCrude oil cut its early losses, but broad commodity markets held 0.5% down on the day by lunchtime in London.<\/p>\n \nSilver prices bounced 3.4% below Tuesday\u2019s peak near $30 per ounce.<\/p>\n \n\u201cIt is difficult to foresee much happening directionally [for silver and gold prices ] into year-end,\u201d says a note from a London dealer today, \u201cas positions are squared up [for] the New Year.<\/p>\n \n\u201cWe are likely to be looking at a headline driven market for the next few weeks.\u201d<\/p>\n \n\u201cComing the day after a difficult [Spanish bond] auction and with the 10-year [bond yield] hitting a multi-year high of 5.43%,\u201d says Gary Jenkins of Evolution Securities in London, quoted by the FT<\/em>\u2019s Alphaville blog, \u201c[Moody\u2019s announcement] is likely to lead to even more spread widening\u201d between low German Bund yields and interest rates on weaker \u2018peripheral\u2019 debt.<\/p>\n \nStandard & Poor\u2019s yesterday cut its debt outlook for Belgium, still run by a caretaker government six months after an indecisive general election.<\/p>\n \nA 20,000-strong protest led by public-sector unions in the Greek capital Athens today ended with rioting and clashes with police.<\/p>\n \n\u201cPanic selling in precious metals [came as] the Euro sank\u201d in Asian trade following Moody\u2019s Spanish warning, says a Hong Kong dealer.<\/p>\n \n\u201cPhysical selling was evident in silver and palladium\u201d he adds, as US Treasury bond yields rose further to touch 7-month highs.<\/p>\n \n\u201cPalladium and silver outperformed gold and platinum by a huge margin in 2010,\u201d notes Axel Rudolph in his latest technical analysis for Luxembourg\u2019s Commerzbank.<\/p>\n \nComparing the relative gains in precious metals this year \u2013 and noting the strong pairing of gold with platinum, and of silver with palladium \u2013 \u201cSilver is the safer metal to hold, since it is less volatile than palladium.<\/p>\n \n\u201cFurthermore during the sharp correction in April and May, palladium dropped by over 30% whereas silver did so by around 13%, thus making it the safer option for 2011.<\/p>\n \n\u201cSilver currently shows the best risk\/reward ratio.\u201d<\/p>\n \nMajor government bond prices rallied meantime on Wednesday from their recent lows, nudging 10-year US Treasury yields down to 3.43%.<\/p>\n \n\u201cWhat is happening [in bond yields] is a move towards normalisation,\u201d writes Financial Times<\/em> economist Martin Wolf of the recent surge in longer-term interest rates, denying that \u2018bond vigilantes\u2019 are punishing government borrowers for poor policy choices.<\/p>\n \n\u201c[It] is excellent news. Policy is working.\u201d<\/p>\n \nBut \u201cthere are good reasons for bond investors to worry about the US,\u201d writes Wolf\u2019s colleague John Plender, also in today\u2019s FT<\/em>.<\/p>\n \n\u201cIt is worth asking whether [bond vigilantes] can exercise real power over the US, which continues to run the world\u2019s main reserve currency while pursuing policies that many investors regard as fiscally irresponsible.\u201d<\/p>\n \nAdrian Ash<\/p>\n \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