After falling on Tuesday, European markets opened up this morning boosted by banks and oil as investors await more corporate results.
Both the FTSE 100 and the FTSE Eurofirst 300 advanced 0.2%
US stocks fell on Tuesday (S&P 500 -0.6% and Dow Jones -0.5%) mainly due to gloomy economic news as a disappointing report on housing starts overshadowed better-than-expected earnings data.
US Treasuries gained, while oil dropped after reaching a one-year high.
Market snapshots (at 11:28):
FTSE All-Share: -0.77%
FTSE 100: -0.75%
FTSE 250: -0.99%
Previous working day closing figures:
Dow Jones: 10,041.48
FTSE All-Share: 2,696.31
FTSE 100: 5,243.40
FTSE 250: 9,486.28
Thoughts (with Henderson New Star)
It has been said that all the physical gold ever produced and above ground in the world would fit neatly into the length of a tennis court if made into a single solid cube. Extraction of the metal is costly and time consuming, leading to limited supplies.
Human fascination with the metal is well recorded - its value as an investment globally acknowledged. Gold acts as safe store of value, as a hedge against inflation and, these days, against a weak dollar.
Peak demand for gold during the financial crisis was in the third quarter of 2008 when Lehman's collapsed, as many were concerned that the extraordinary steps taken by central banks in propping up the global economy could lead to higher inflation.
There is now a new factor in the investment equation for gold - the retail investor - and ‘asset bubble' theories are surfacing. Although overall demand for the metal has dipped slightly since the end of 2008, it is still high by historical standards, with retail demand for investment purposes increasing by 72% in 2008, buoyed by demand from China.
Chinese retail investors are rushing to invest, often with borrowed money, at times 90% of the value of their investments. Europe is not that far behind, online gold dealers are reporting boom times. At Frankfurt airport you can now buy gold from a dispensing machine in much the same way as a bar of chocolate, and in London you can buy a bar of gold while shopping at Harrods.
How will rising demand be met and what will rising prices do to the global economy as a whole? Unlike other commodities, a rise in the price of gold will not filter through inflation elsewhere and as the global recovery finds its pace, history of trends and cycles state that investors' attention will be shifted elsewhere. What it does do now though, is signal alarm.
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