Gold Near Record USD and EUR High – Eurozone Debt and U.S. Default Risks Global Financial Contagion

Gold is marginally higher against most currencies today and is trading at USD 1,614.40, EUR 1,130.50, GBP 990.08 and CHF 1,294.50 per ounce. Gold is flat against the dollar but remains just less than 1% from the record nominal high reached yesterday ($1,628.05/oz).  The euro is under pressure again today and gold is 0.7% higher against the euro and is just less than 1.5% away from the record euro high of EUR 1,144.80/oz reached last Monday.


Cross Currency Rates

Early gains in Europe saw gold fix at USD 1617.50/oz in London prior to a bout of selling saw gold fall and then rise again. Volatility has increased but remains low compared to levels seen in the late 1970’s. 

European indices followed Asian indices lower (Nikkei -1.45%, Sensex -1.03%, Shanghai -1.01%, Hang Seng +0.3%, STI -0.49%) and the FTSE is down 0.73%. The Italian MIB is down 1.2% and the DAX 1.66%.  

Investors were made nervous by comments from chemicals major BASF, which said it saw global economic growth slowing as it posted weaker-than-expected earnings, sending its stock down 4.9%.

Siemens AG, Europe’s largest engineering conglomerate, warned that global economic risks were increasing and posted below forecast results. Its shares fell 1.3%.

As per yesterday, Spanish and particularly Italian bonds are under pressure today with the Spanish 10 year rising to 6.06% and the Italian 10 year rising to 5.94%.

One-year CDS (credit default swap) prices on U.S. debt have moved above five-year CDS prices, signaling that the risk of financial contagion remains real.

Europe’s STOXX bank index has lost about 25 percent since mid-February suggesting jitters regarding the possibility of a second phase to the banking crisis.

The Dow to Gold Ratio has again turned down suggesting gold may continue to outperform U.S. stocks and the DJIA, in particular, in the coming weeks. The long term target of below 2:1 remains viable.


Dow-to-Gold Ratio: Financial Assets vs. Hard Assets

Separately, JP Morgan (JPM) have  forecast gold to rise to $1,800/oz by year end on continued strong retail and official demand. and lower scrap supply.

For the latest news, commentary, infographics and videos on gold and financial markets follow us on Twitter.

SILVER 
Silver is trading at $40.24/oz, €28.15/oz and £24.68/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,782.75/oz, palladium at $825/oz and rhodium at $1,925/oz. 

NEWS
(Bloomberg) 
Gold Trades Near All-Time High as U.S. Lawmakers Strive to Avert Default

(Reuters) 
Gold pauses after hitting records; U.S. debt in focus

(The Telegraph)
Dominique Strauss-Kahn: phone recordings ‘prove’ maid is not a gold-digger

(The Sun)
Gordon Brown’s Bullion bungle that cost us £600 each

COMMENTARY
(The Telegraph) 
Flee to Mars if America commits worst error since 1931

(Got Gold Report)
Gene Arensberg: Charts mark path to new era of hard-money currency

(GoldSeek) 
Gold Report and John Williams: Debt Limit Debate Sign of Deeper Dysfunction

(ZeroHedge) 
A Thousand Pictures Is Worth One Word: Worthless

(Wall Street Journal)
Rosenberg: Debt Impasse Helping Treasurys <and Gold> (Possible Economic Chaos Ahead)

(Casey Research)
Gold Noise Growing Louder

(Washington Times)
Is the bubble gold or is gold in a bubble?

 

 

 

Mark O'Byrne

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