Euro Gold Rises to New Record High on Renewed Greek Concerns

Gold
Gold jumped to as high as $1,133/oz in New York before dropping slightly to close with a gain of 0.71% yesterday. It has since range traded from $1,124/oz to $1,130/oz in Asian trading this morning. Gold is currently trading at $1,125/oz and in euro and GBP terms, it is trading at €839/oz and £742/oz respectively. Gold priced in euros has risen to a new all-time high above €839 an ounce this morning due to renewed concerns about Greece’s fiscal position (see News below).

Gold in EUR (YTD)

After single digit returns for the first quarter, gold and silver gained almost 2% and 6% last week and continued their gains yesterday. Today has seen some profit taking with the dollar remaining firm and oil having given up some of its recent gains. However the recent gains seen in the commodity sector especially with oil over $86 a barrel and copper over $8,000 per metric ton will lead to inflation concerns and inflation hedging with gold.

Gordon Brown’s election announcement and the prospects of a hung parliament will likely see sterling come under renewed pressure in the coming weeks and should see sterling gold rise to new record (nominal highs) near £760/oz – from £742/oz today.

Gold in EUR (1 year)

Silver
Silver has range traded from $17.90/oz to $18.02/oz this morning in Asia. Silver is currently trading at $17.92/oz, €13.37/oz and £11.80/oz.

Platinum Group metals
Platinum is trading at $1,695/oz and palladium is currently trading at $505/oz and rhodium at $2,600/oz.

News
Concerns about Greece have resurfaced amid a report that the country wants to amend a standby aid plan to avoid the imposition of onerous fiscal measures by the International Monetary Fund.  The plan, formulated at a European Union summit last month, would see a combination of bilateral loans from eurozone countries and aid from the IMF if Athens is unable to meet its funding needs. Greek Prime Minister George Papandreou reportedly fears that added austerity measures that the IMF probably would require could cause social and political unrest. Papandreou reportedly wants to alter the plan to bypass an IMF contribution. Meanwhile, the Financial Times reported that Germany is at odds with other euro-zone countries over the interest rate on any bilateral loans that are offered to Greece under the plan. The Financial Times reports that Greece will target US investors with a dollar-denominated bond. Finance Minister George Papaconstantinou will lead a roadshow to the United States after April 20, but now no longer plans to travel to Asia.

Greece will this month launch a multi-billion-dollar bond in the US in its hunt for new investors, selling itself for the first time as an emerging market country as demand for its debt dwindles in Europe. This has implications for the euro as a global reserve currency and could lead to further pressure on the Euro.

UK Prime Minister Gordon Brown announced today that Britain will go to the polls on May 6, setting up a tight election battle over the UK’s battered economy and soaring deficit that could result in political gridlock. Markets fear an election deadlock which could make it harder for whoever wins the election to push through the tough medicine the UK needs to confront a budget deficit that is the highest amongst major economies. It would also make king makers of parties such as the centrist Liberal Democrats and Northern Ireland’s Democratic Unionist Party.

Australia’s central bank has raised interest rates to 4.25% from 4% as it attempts to cool inflation and slow rises in house prices.

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Mark OByrne

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