If the banks don't straighten out their inter-bank lending soon, this is the tip of the iceberg for gold & silver.
From Investor's Hub's daily email on the status of markets:
Gold jumps 3 pct as investors rush to safety
LONDON - Gold rallied more than 3 percent on Wednesday as investors rushed to buy safer assets while the worst financial crisis in nearly 80 years battered stock markets across the globe.
World stocks dropped to four-year lows while European shares plummeted more than 7 percent to five-year lows as rescue packages failed to calm down market jitters around the globe Silver jumped nearly 5 percent while palladium rallied 3 percent, tracking gains in gold. One exception was platinum, which tumbled by as much as 6 percent at one point, due to poor demand prospects.
Gold was trading at $911.35 an ounce, up $24.75 from 886.60 an ounce late in New York on Tuesday, after jumping to $915.30 an ounce, its highest since September 29. "It is absolute fear out there right now," said Standard Bank analyst Walter de Wet. "And it is driving all of the assets down but safer assets like gold is rising."
Gold has gained 25 percent since mid-September as a deepening financial crisis, spreading to European banks after U.S. has prompted investors to sell their investments in equity markets and seek refuge in safer assets. It is still below a lifetime high of $1,030.80 an ounce struck in March.
Physical demand for gold also has shot up, analysts say, as the banks being taken over by governments or sold to their rivals prompted consumers to invest in gold coins. The U.S. Mint said on Tuesday that because of the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is "unprecedented".
"There is a lot of tightness in the market," said Jeremy East, global head of metals trading at Standard Chartered . "It may well continue -- there is a big demand for physical gold and for ETFs," he said.
Holdings in the world's largest gold-backed ETF, the SPDR Gold Trust GLD, rose to 745.22 tonnes as of Oct. 8 from 744.54 tonne as of Oct. 7.
"This is a good time to buy gold. Stock prices are not so good. ETF is a good support for gold prices. This is the actual investment buying," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.
