Gold soars as fears mount over US mortgages By
Allan Seccombe
Posted: Tue, 15 Jul 2008
MOUNTING worries about the global credit crisis
are driving the gold price to within easy striking distance
of $1,000/oz, with fears over a possible attack on Iran bolstering
bullish sentiment around the metal.
Gold is at its highest level in three months,
trading at $983.60.
News on Monday of AngloGold Ashanti shutting
4.4 million ounces out of its 11 million ounce hedge book
was not much of a factor in the rapid rise of the gold price
this week, said Matthew Turner, a senior commodities analyst
at Virtual Metals.
gold
has a very close correlation with the credit crisis
Bullish sentiment around gold has been fuelled
by a 46 tonnes purchase of gold to meet an order for exchange-traded
funds in the United States late last week, Turner said.
Its the return of the credit crunch.
Weve seen one large mortgage lender in the States close
and there are a lot of concerns about this Freddie Mac and
Fannie Mae bailout, he said.
The gold price has a very close correlation
with the credit crisis, he said. I would say that
is the main reason.
When the credit crisis peaked in March this
year gold bolted above $1,000/ oz before concerns abated slightly,
cooling the gold price, Turner said. Gold hit a record $1,033.90/oz
on March 17.
On Friday, the US had its third-biggest bank
failure when IndyMac Bancorp collapsed.
The news was quickly followed by a the Treasurys
decision to bail out housing market financing companies Freddie
Mac and Fannie Mae, which buy mortgages and sell them to investors.
The two companies, which supply funding to
almost all US mortgage lenders, are billions of dollars in
the red as homeowners fall behind in their repayments leading
to widespread defaults on loans.
The widely followed and respected investor
Jim Rogers told Bloomberg the decision was an unmitigated
disaster.
I don't know where these guys get the
audacity to take our money, taxpayer money, and buy stock
in Fannie Mae, Rogers said in an interview with the
newswire. So we're going to bail out everybody else
in the world. And it ruins the Federal Reserve's balance sheet
and it makes the dollar more vulnerable and it increases inflation.
George Soros, another respected commentator
on markets, told Reuters: This is a very serious financial
crisis and it is the most serious financial crisis of our
lifetime.
The gold price could well spike through $1,000
if Israel attacks Iran, which is alleged to be building nuclear
weapons under the guise of a nuclear energy programme. Iran
has test fired missiles, sending a clear message it will retaliate
if attacked.
The jitters about conflict in the oil rich
region have fed into sentiment driving gold prices higher,
said Marc Elliot, an analyst at Fairfax in London.
Im not overly confident that gold
will get above $1,000 in the next month unless we suddenly
get a war breaking out in the Middle East, he said.