Gold soars as fears mount over US mortgages By
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
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
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
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
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
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.