Gold surged to all-time highs above $US1,200 an ounce yesterday and overnight after the fears about risk and the collapse of Dubai faded and the US dollar dropped sharply.
It was in fact more of what we have seen in recent weeks.
Gold hit the new records for a second straight day, Asian shares rose as returned to their search for yield and chased riskier assets.
In some respects it’s a re-run of the years leading up to mid 2008 and the near implosion of global markets.
Sot gold rose 1% to $US1,208.70 in Asia, with futures prices hitting $US1212 an ounce.
It later hit a new high of $US1,217.30, before falling back to around $US1210 an ounce.
Gold prices have surged more than 34% so far this year and have risen steadily since the beginning of November.
A solid rise in US home sales (driven by the tax rebate for new home buyers, a point ignored by the punters) helped lift US confidence on Tuesday, but overnight that faded and Wall Street was quieter.
European markets were marginally up as some continued to fret about the problems in Dubai.
Asian markets were higher.
Copper touched its highest level in 15 months, rising above $US7,000 a tonne in Asian trading yesterday, or over $US3.22 a pound.
Gold’s rise was driven by the weak US dollar which fell below $US1.51 to the euro at one stage.
The Australian dollar jumped over the 92 US cent mark.
But oil only moved marginally above $US78 a barrel after industry figures showed the US market remains awash in stocks of crude and product, which tells us something about the true state of health in the US economy.
Oil prices fell back to around the $US76 a barrel in US trading overnight.
Oil prices have not returned to the $US83 a barrel level they were a month ago as growing stocks of crude and product around the world tell us that global demand is very weak.
Only China is a growing demand in a significant fashion, but that’s not enough to lift global prices.
Emergency steps announced by the Bank of Japan on Tuesday, primarily short-term funding for banks, did not convince markets that the Japanese Government or financial establishment are serious attacking deflation or the rising value of the yen.
The monthly survey from the Institute for Supply Management showed the US manufacturing sector was still growing, followed upbeat surveys from China showing a strong expansion.
In Australia shares closed at a five-week high after the jump in gold prices led to a rally by gold stocks.
At the close, the benchmark ASX200 index was up 43.4 points, or 0.9%, to 4762.4, while the All Ordinaries added 43.6 points, or 0.9%, to 4776.4.
Most sectors were higher, with materials stocks up 2.1%, gold shares rose 4.6% and financials were up 0.4%.
Investors ignored the rise in the Australian dollar which trimmed the local currency returns for miners.
Property trusts fell again after the rise in interest rates on Tuesday. They finished down 1.4%.
