European Bond Spreads Widen Again – Gold Strong in All Currencies and is Whisker from New Intra Day Record in US Dollars

Gold

Gold rose again yesterday and had a new record daily high close (nominal) as renewed concerns about European banks and sovereigns led to a flight to the relative safety of US Treasuries, German bunds, the yen and the Swiss franc. Gold also rose in yen and Swiss franc terms yesterday showing that it is increasingly trading as a currency rather than a commodity. Gold surged in the euro and is again challenging the €1,000/oz level.

Gold is currently trading at $1,258.10/oz, €991.64/oz, £814.73/oz.

Gold in Swiss Francs – 2 Day (Tick). Click on image to view full size

Gold in Yen – 2 Day (Tick). Click on image to view full size

Gold for December delivery added $8.20 to settle at $1,259.30 an ounce after reaching $1,261.60/oz earlier in the day. Its record high settlement price was $1,258.30 an ounce, although it has reached an intraday high of $1,266.50 an ounce on June 21st.  Gold could continue to rally in the traditionally strong September and autumn months and should it breach new record intraday highs, gold will likely target the $1,300/oz level, especially as demand in India and Asia continues to be robust. This is especially the case in India as we enter the festival season as seen in Indian premiums overnight.

Investors are continuing to use gold as a hedge against financial and economic risk which has again increased  as seen in widening spreads between 10-year German bond yields and those of Irish and Portuguese debt which climbed to all-time highs yesterday, while the German-Greek yield spread increased to the widest since May.

Cross Currency Rates at 1000 GMT. Click on image to view full size

This morning the Portugal German 10 year yield spread has widened to a new EMU record, as has Ireland’s 10-year spread which is 7bps wider at +395bps. Italy and Spain’s debt markets have also come under pressure again this morning – Italy’s 10-year spread is 4bps wider at +155bps and Spain’s 10-year spread is 3bps wider at +176bps.

Greece’s 10-year spread is 4bps wider at +946bps after the worrying news that four months after the 110 billion-euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt.

Silver

Silver peaked over the $20/oz level briefly before giving up the early gains and closed marginally higher. The COT data for silver is bullish as it shows that open interest levels remain below the levels seen in March 2008 when silver reached its record high of $20.81/oz. Silver has broken resistance and a close above $20/oz could lead to further sharp moves up and a challenge of the March 2008 highs.

Silver is currently trading at $19.90/oz, €15.68/oz and £12.88/oz.

Platinum Group Metals

Platinum is trading at $1,550.75/oz, palladium is at $522/oz and rhodium is at $2,050/oz.

Mark OByrne

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