Gold Spread Betting Market Rallies on Reports of Central Banks Buying into Metal
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 19 September 2011: 11.00am Update
There were heavy losses for the FTSE this morning, as Greek fears hit markets with renewed vigour. A Greek default has been on the cards for some time, and the lack of progress from the weekend summit in Poland has made investors nervous about the effects of such an event.
By 10.30am (London time), the FTSE 100 had lost 1.94% to 5264.03, and the FTSE 250 was 1.75% lower at 10,245.61. Yet again, the Greek problems hit Europe hard, with losses on the CAC 40 and the DAX 30 approaching 3%.
Greek tragedy
Markets spent most of last week merrily ignoring the Trojan Horse of Greece, perhaps in the hope that the weekend summit would provide some positive news.
With almost tedious predictability, nothing good emerged from the meeting, with leaders agreeing once again to delay vital decisions. Leaders dodged the issue of expanding the rescue fund, and also put off making up their minds on whether Greece should actually receive the next tranche of aid at all.
Given that Greece is expected to run out of money in mid-October, the decision to wait until early October is cutting it awfully fine, to say the least.
Greece now has to convince the troika that it is still on track with its deficit-cutting efforts, a task that gets more difficult by the day. Even if it does persuade financial spread betting investors, everyone is aware of how tight the timing is.
Once again, Europe’s leaders, by their inability to produce a real solution, are bringing the world perilously close to the edge. Tim Geithner might have been criticised for speaking out on Europe when he has so many problems at home, but he does have a point; Europe needs to sort this mess out, or risk implosion.
Gold back in favour
The outbreak of risk appetite towards the end of last week hurt the gold spread betting market, as traders abandoned the ultimate safe haven, but the yellow metal has staged a small recovery today, pushing back above $1800 per ounce.
Gold is being helped by the renewed Greece worries, but also by reports that European central banks have become buyers of gold for the first time in 20 years.
Although the purchases are only small, they represent a significant change in policy. Emerging-market central banks have been enthusiastic buyers of gold for some time now, in a bid to offset their US dollar holdings, which have become weaker as the Federal Reserve undertakes sustained quantitative easing efforts.
Ocado fails to deliver
Shares in online supermarket Ocado slumped 13% to 116p this morning, following the release of a trading statement that confirmed many of the fears of analysts.
Sales growth slipped in the three months to 7 August, dropping to 16.9% from a year-to-date 19.5%, and the company cautioned that full-year margins would be affected by investment in its ‘customer fulfilment centres’ (the term used by Ocado for warehouses).
Today’s fall means that Ocado is down more than a third from its listing price of 180p. Questions about the viability of the business have refused to go away, and are likely to increase as erstwhile partner Waitrose puts more and more effort into its own home-delivery service.
US pre-market
It’s been a quiet day for economic data on this side of the Atlantic, and this is set to continue this afternoon, with no significant US data due for release. US futures are pointing to early falls for Wall Street, with those for the Dow 1.64% lower and S&P 500 futures down 1.86%.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
The above comments do not constitute investment advice and neither IG Index nor SpreadBets.org.uk accept any responsibility for any use that may be made of them.
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"Gold Spread Betting Market Rallies on Reports of Central Banks Buying into Metal" last update by AG, 19-Sep-2011
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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