Gold and Silver Higher As ECB Intervenes in Markets – Currency and Euro Debasement Accelerates

Gold in USD terms is 2.5% higher after the weekend U.S. downgrade and is higher against all currencies and trading at USD 1,706.40 , EUR 1,195.90 , GBP 1,039.20, CHF 1,039.20 per ounce and 132,549.00 JPY.  Gold’s London AM fix was USD 1,709.75, EUR 1195.21, GBP 1,040.94.


Cross Currency Rates

There has been massive intervention by the ECB in the Spanish and Italian bond markets. 10 year yields have plummeted by more than 12% from above 6% to 5.27% and 5.34% respectively.

Other peripheral bond markets have fallen but Portuguese and Irish yields are only slightly lower. 5 year CDS have also fallen sharply for Spanish and Italian debt but falls in other markets were slighter and the cost to ensure French debt increased by 7 basis points. 

There is increasing talk of a French downgrade and some are wondering why the UK has not been downgraded.

Gold is up 2.6% in euro terms to nearly EUR 1,200/oz which is not a ringing endorsement of the ECB’s intervention.

Non debase-able silver has surged nearly 4% and is back just below $40/oz. 


European Bond Market Monitor

It is quite possible that there was also intervention in equity markets as well as European indices fell sharply on the open prior to sharp reversals and going positive early morning.  If there was intervention (by Working Group on Financial Markets or the ‘Plunge Protection Team’) in equity markets they were futile as equities have resumed their downward trend.

The FTSE, DAX and CAC are down 1.9%, 2.9% and 2.5% respectively and US futures are showing 2% to 3% losses.

Is this intervention another short term panacea in a long line of short term panaceas? 

It certainly looks like it. Piling more debt on top of already humungous debt levels will prolong and likely deepen the global debt crisis.

It makes contagion more likely as the balance sheet of the ECB is now being infected by the peripheral European countries.

The electronic creation of hundreds of billions of euros to bail out bankrupt countries is currency debasement which has a long history of not working out to well.

What is needed is debt forgiveness and debt restructuring and a gradual deleveraging and downsizing of the balance sheets in the banking sector and financial system. Taxpayers should not be further burdened. This is unjust and will inevitably prolong and delay a recovery.

Those with little or no knowledge of financial, economic and most importantly monetary history continue to warn that gold is or may be a bubble. They should be urging diversification but alas do not understand diversification or gold.

They focus exclusively on the nominal dollar price and fail to consider the price in euros and other fiat currencies.


XAU-EUR Exchange Rate

They do not adjust for the significant inflation of the last 31 years. Gold’s real record high in 1980 was $2,400/oz. 

They do not compare gold’s price performance in last 10 years with that of its last bull market in 1970’s. 

Considering gold purely in terms of price is misguided anyway as what is more important is gold’s value.

Gold’s value is as a safe haven asset that cannot go bankrupt, as financial insurance and as a store of value.

Many today know the price of everything and the value of nothing. This is especially the case with gold. 

SILVER 
Silver is trading at $39.85/oz, €27.91/oz and £24.28/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,723.00/oz, palladium at $737/oz and rhodium at $1,825/oz. 

NEWS
(Wall Street Journal)
Gold Breaches $1,700/oz, Hits Record High On U.S. Downgrade

(Reuters)
Oil falls, gold hits record as risk assets spurned

(MarketWatch)
Gold tames $1,700 after S&P downgrade

(Wall Street Journal)
Rising Gold Prices Spur Investment Buying in India

(Google News)
Japan rice futures soar on nuclear fears

COMMENTARY
(The Telegraph)
Garry White: Gold to Shine on 40th anniversary of Nixon Shock

(King World News)
Jim Rickards Interviewed by King World News: As many as 20 owners for each bullion bank gold bar

(The Telegraph)
Liam Halligan: We can’t rely on oil prices or QE to save us from this mess

(ZeroHedge)
One Ounce Of Religious Non-Money Tradition = $1700

(Lew Rockwell)
Gary North: The Yellow Fever Economy

 

Mark O'Byrne

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