North American Stocks Stage Broad Rally

Source:

Yesterday's moves in gold bullion prices were broader based, consolidating on the gains made over the previous three trading days. This broadened the wider gold equities rally, which spread rapidly to North American silver stocks. The most significant and powerful investment inflow was evident among the Tier I gold grouping.

North American gold stocks staged a broad rally on Monday, as gold bullion moved once again through the USD 900 an ounce level. This was the most convincing turn among any global resources sub-sector since the bankruptcy of Lehman Brothers, once an investment bank, hit Wall Street and the world a week ago, triggering widespread actions by the US Treasury and the Federal Reserve, the US central bank.

Monday's gold moves followed further weakness in the dollar index or DXY, which measures the trade weighted value of the dollar, as investors continued to digest the TARP - troubled asset relief program - announced by US Treasury Secretary Hank Paulson.

While the plan, which aims to mop up toxic mortgage debt in the US, boosted investment confidence across the world, it is also seen as potentially dangerous for the dollar, given that TARP requires the issue of up to USD 700bn in US Treasury paper. Markets are questioning the potential volume of new US government debt, and the very rapid expansion of the balance sheet at the Federal Reserve. Earlier this year, the dollar made six-year lows, before staging a huge 12% rally between 15 July and 11 September, a move that saw gold bullion hammered down from USD 977.50 to USD 736.70 an ounce. Early bets on gold bullion - and against the dollar - were seen last week Wednesday, when the price rallied more than USD 100 an ounce, before spiking without conviction through the USD 900 level on Thursday.

Monday's moves in gold bullion prices were broader based, consolidating on the gains made over the previous three trading days. This broadened the wider gold equities rally seen on Monday, which spread rapidly to North American silver stocks. The most significant and powerful investment inflow was evident among the Tier I gold grouping.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe