Precious Metals CRUMBLE!
If you kept your eyes fixated upon metal's performance yesterday, you were surely in shock of what is taking place today; as precious metals are in deed collapsing! Gold is slumping at a very rapid pace, exceeding $54 dollar an ounce till now, down by 3.36% when trading at 1138.00 as of 02:48 EST. Gold crumbled from the highest set yesterday at 1193.40 and by that the metal managed to scatter the entire week's gains!
Silver and platinum also slumped and today the former sagged 6.16% in a major selloff taking silver from its high recorded yesterday at 18.87 to trade today at 17.68. The sever drop seen in metals accompanied a strong decline across global equity markets and commodities as well.
Greenback soared today strongly against major traded currencies and oil slumped, as fears of the Chinese plans for banks to raise capital was accompanied by bankruptcy in Japanese Banks, and coated by the fatal drug in the end, which was Dubai's announcement of delaying their debt payments after they sought a standstill agreement from creditors, which ignited fears that the Sheikhdom will fail to meet its liabilities triggering a new wave of defaults.
A panic sell-off was triggered from Europe mainly yesterday led by UK which is the biggest investors in Dubai markets, especially properties market, which has slumped amid the catastrophic slump in the construction sector. Investors rushed into the safety of Treasuries and governmental bonds after credit default swaps soared and equities slump powered lower yielding currencies as the dollar and the yen advance amid investors fleeing of markets and risk.
Despite the prevailing bullish expectations for gold over the medium term, yet the intraday and short term outlook have reversed to the downside, and we advice caution to be administered amid violent and volatile trading, which might be embedded with severe correctional movements on gold and other metals. Platinum of instance dropped today by $49 to return trading at 1424.00 per ounce.
Anxiety is obvious across global financial hubs, and the intensity of the situation was further aroused after the Japanese Finance Minister, Hirohisa Fujii, said that he will contact his European and American counterparts regarding exchange rates if needed, increasing the risk of an intervention in the market, as the yen trades around its highest in 14 years versus the dollar. That is adding further downside pressures upon the world's second largest economy and triggered a massive yen buyback wave as investors closed their long positions on higher yielding currencies versus the yen.
The fear over Dubai's default on its sovereign debt, which will be the biggest since Argentina's default in 2001, triggered a panic selloff wave, which might be the start of the needed market pullback awaited for sometime now! Their incapability to support the market and their economy has affected all financial markets, especially as large major players and banks are holding Dubai's debt instruments or have related investments, and adding to the fact that Dubai's is a major player in Gold markets and that affected the shiny metal strongly.