ALS STOCKS Gold futures climb another $30 as crisis continues
By Steve Goldstein & Moming Zhou, MarketWatch Last update: 9:09 a.m. EDT Sept. 18, 2008Comments: 32LONDON (MarketWatch) -- The rally in gold extended into Thursday as turmoil in the financial markets led the Federal Reserve and five other central banks to take further efforts to get global money markets moving again. After a $70 rally on Wednesday, gold futures rose a further $28, or 3.3%, to $878.50 an ounce in early morning trading on the Comex division of the New York Mercantile Exchange. "We have been surprised that gold has been so heretofore quiet, and have expected a much stronger and more immediate response to the government takeover of GSE/mortgage and insurance entities, and broker-dealer bankruptcies," said Citigroup analyst John Hill. "It is notable that the hard-core goldbugs have been proven correct in the decade-long contention that an overwhelmingly vast and complex pool of nested financial derivatives would ultimately result in cascading defaults and ruin for major portions of the banking system," he wrote in a note to clients. "Frankly, we're surprised that gold is not already at $2,000 per ounce." The banking tension was given new weight on Thursday as the Fed authorized a $180 billion expansion of its swap lines with other world central banks. The funds, which will be provided by the U.S. central bank, can be injected into money markets through overnight and term loans. See related story. The decision comes a day after measures of short-term borrowing costs made huge jumps as banks grew increasingly wary of lending to each other in the wake of the failure of investment bank Lehman Brothers and jitters about the entire financial sector. Adding more uncertainties to the financial system, speculation on Thursday had both Morgan Stanley (MS:morgan stanley com new News, chart, profile, more Last: 21.75-6.95-24.22%
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Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: MS 21.75, -6.95, -24.2%) and Washington Mutual (WM:Washington Mutual Inc News, chart, profile, more Last: 2.01-0.31-13.36%
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Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: WM 2.01, -0.31, -13.4%) seeking out merger partners. Gold's Wednesday rally, the biggest dollar gains in more than two decades, came as a key money-market fund "broke the buck," as Russia halted trading in its stock market and as rumors swirled around the health of UBS, though both the Swiss bank and its regulator denied them. According to Brien Lundin, editor of Gold Newsletter, a piling of short positions -- or bets that gold would fall -- had led gold's recent correction to under $750 an ounce. This, he said, was unjustified, "just as gold's run over $1,000 this year was unjustified." "Now, the fundamentals of gold are coming back into play, and we're seeing the resulting snapback in the price," Lundin said. "Physical demand is breaking records, mining supply continues to fall, and the economic environment is, of course, promoting safe-haven demand," Lundin continued. "The shorts are covering, the funds are buying back in, and everyone wants the safety of gold." Other metals also moved higher. December silver surged 9% to $12.72 an ounce, October platinum added 3.4% to $1,123 an ounce, and December palladium rose 5.3% to $239.15 an ounce. Copper for December delivery added 3.3% to $3.14 a pound. In spot trading, the London gold fixing price (38099902:Gold - Afternoon Fix (Source N M Rothschild) News, chart, profile, more Last: 813.00+813.000.00%
38099902 813.00, +813.00, 0.0%) , used as a benchmark for gold for immediate delivery, stood at $864.25 an ounce Thursday morning, up $51.25 from Wednesday afternoon.
