Euro and Global Debt Contagion Concerns Mount – Gold’s New Record Nominal Highs in Euros and Pounds

Europe’s debt crisis has seen gold prices climb to new record highs in euros and British pounds at EUR 1,087.80/oz and GBP 944.93/oz respectively. Contagion concerns are mounting due to the failure of the ECB, the IMF and respective governments to tackle the sovereign debt crisis. 


Cross Currency Rates

The scale of the debt crisis effecting Greece, Ireland, Italy, Belgium, Portugal and Spain is leading to growing concerns of a knock on deleterious impact on European banks and the global banking system.

The real risk of contagion will likely lead to increasing safe haven demand for gold.

Gold should also be supported today by the OECD’s warning regarding the U.S. and Japan’s very poor fiscal situations and their lack of credible plans to tackle high and spiraling budget deficits.


Gold Bullion in US Dollars – 30 Days (Tick)

Gold has broken out in euros and pounds and this strength is likely to again be seen in dollar terms with the record nominal high of $1,577.77 likely to be challenged again.

There is good support at $1,460/oz (see chart above) with strong physical demand seen internationally.

Gold in dollar terms is challenging resistance at $1,527/oz and a break out close above this level could see a quick move to challenge resistance at the record nominal high of $1,577.57/oz and the psychological level of $1,600/oz.


Gold Bullion in US Dollars – 20 Days (Tick)

Long term the real record high of $2,400/oz from 1980 remains likely to be achieved.

Gold bears and gold bubble callers’ predictions of falling gold prices are again likely to be proved badly wrong. Rather than continually attempting to predict the future and predict the top of the market they would better serve their readers by properly analyzing the real fundamentals driving the market and informing people of the importance of having at least some allocation to gold – especially from a financial insurance and diversification point of view.

SILVER

Silver’s fundamentals remain even stronger than gold’s and the recent paper driven sell off due to a series of margin calls and heavy selling on the COMEX appears to be over.

Silver has support at the recent low of $32.31/oz. There are continuing calls by knowledgeable silver analysts for silver to rise above $100/oz which suggests that silver may rise above its nominal high of $50/oz sooner than the silver cynics expect.


Silver Bullion in US Dollars – 10 Days (Tick)

GOLD

Gold is trading at $1,526.40/oz, €1,085.48/oz and £941.35oz.

SILVER

Silver is trading at $37.15/oz, €26.42/oz and £22.91/oz. 

PLATINUM GROUP METALS

Platinum is trading at $1,767.25oz, palladium at $740/oz and rhodium at $1875/oz. 

NEWS

(Reuters) — Gold off 3-week high, euro-priced bullion hits record
http://www.reuters.com/article/2011/05/25/businesspro-us-markets-precious-idUSTRE74F62H20110525

(Bloomberg) — Gold Declines as Advance to Three-Week High Prompts

http://www.bloomberg.com/news/2011-05-25/gold-declines-as-advance-to-three-week-high-prompts-selling-silver-drops.html

COMMENTARY

(King World News) — Silver’s tightness could take it to $125, Embry tells King World News
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/5/24_Embry_-_Silver_Market_Extraordinarily_Tight%2C_Look_for_%24125.html

(Barrons) — Gold, Silver Find A Perfect Storm
http://blogs.barrons.com/focusonfunds/2011/05/24/gold-silver-find-a-perfect-storm/?mod=BOLBlog

(Financial Times) — In defence of gloomy columnists
http://www.ft.com/intl/cms/s/0/d9d1f12c-856f-11e0-ae32-00144feabdc0.html#axzz1NLpV1yCA

(The Daily Reckoning) — Silver…Still Precious
http://www.dailyreckoning.com.au/silver-still-precious/2011/05/25/

(SilverSeek) — Silver More Explosive than Gold http://news.silverseek.com/SilverSeek/1306285200.php

Mark O'Byrne

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