Daily Market Update

Gold New Record High in Euros (€1,375/oz) on Greek Default and Eurozone Contagion Risk

Gold is marginally lower in most currencies and is trading at USD 1,836.60, EUR 1,350.90, GBP 1,158.90, JPY 141,320, AUD 1,779 and CHF 1,626 per ounce. Gold reached a new record nominal highs in Australian dollars, Swiss francs and euros this morning. 

Gold’s London AM fix this morning was USD 1,843.00, EUR 1,354.94, and GBP 1,164.10 per ounce.  Friday’s AM fix was USD 1,879.50, EUR 1,359.39, and GBP 1,177.12 per ounce.

Cross Currency Table 

There has been a sharp increase in risk aversion with the euro and stocks internationally falling sharply due to concerns about the coming Greek default and the real risk of contagion in the Eurozone.

The euro got off to a rocky start in Asia, falling to fresh six-month lows against the dollar and a 10 year low on the yen as downside momentum picked up after several key technical levels gave way recently.

Gold could see weakness today due to dollar strength and the possibility of margin calls for leveraged players on the COMEX. 

However, bargain hunting bullion buyers are present at these price levels and gold is likely to be supported above $1,800/oz.

While dollar strength would normally result in gold weakness it is very possible that both the dollar and gold could rise together in the short term. This would result in gold making sharper gains in pounds, Swiss francs, euros and other fiat currencies.

France’s largest banks by market value, BNP Paribas SA, Societe Generale SA and Credit Agricole SA, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings.

Officials in Merkel’s government are debating how to shore up German banks in the event that Greece defaults. Merkel is due to hold talks on the debt crisis with European Commission President Jose Manuel Barroso today.

The risk of contagion in the Eurozone sovereign, banking and entire financial system is very real and will result in continuing safe haven demand.

Gold in Euros – 30 Day (Tick)

Gold is being supported by broad based global gold demand. Demand dropped in the second quarter of this year compared with the second quarter of 2010, but is expected to strengthen by the end of 2011, driven by robust store of wealth jewellery buying in India and China and recovery in global investment demand, the World Gold Council said over the weekend. 

The real risk of a U.S. and wider global recession is prompting investors to buy gold as safe haven while Asian consumers continue to buy jewellery and increasingly gold bars as a store of value and inflation hedge.

Gold’s unloved little brother silver continues to receive little or no media coverage which continues to be bullish from a contrarian perspective. 

Silver Bullion in USD – 1 Year (Daily)

Silver has been quietly consolidating for the last two months between $37/oz and $44/oz. A close above $44.25/oz could see silver quickly challenge the recent and 1980 record high at the $50/oz level. 

Longer term the real high (CPI inflation adjusted) of $130/oz remains a realistic price target.

Silver at just under $42 per ounce continues to be more attractive to many investors relative to gold at about $1,850.

At 44:1 the gold silver ratio continues to favour silver with many silver buyers conscious of the long term historical gold to silver ratio of 15 to1.

Silver is also more attractive to many jewellery manufacturers and jewellers whose margins on gold jewelry are being badly squeezed.

Jewellery makers at an international trade fair in London have said that silver is seeing greater use in jewellery as rising gold prices put off cash strapped consumers.

High prices have practically squeezed gold out of the low and medium-priced segments of western jewellery markets, with other metals replacing gold for small gifts worth 100-300 euros, industry officials said.

David Lamb, managing director for jewellery at the World Gold Council (WGC) said that "at the current prices of gold, that level of jewellery in gold has really disappeared." 

For the latest news and commentary on financial markets and gold please follow us on Twitter.

Silver is trading at $40.85/oz, €29.99/oz and £25.76/oz. 

Platinum is trading at $1,806.00/oz, palladium at $721/oz and rhodium at $1,750/oz. 

Gold Advances as Europe’s Escalating Debt Contagion Boosts Haven Demand

Germany studies potential impact of Greek default

(Spiegel Online)
German Finance Minister Prepares for Possible Greek Bankruptcy

Gold Bets Help Hedge Funds Weather August Global Market Rout

(The Telegraph)
Ambrose Evans-Pritchard: Germany and Greece Flirt with Mutual Assured Destruction‎

(Zero Hedge)
Things That Make You Go Hmmm – Such As The Keystone Cops At The Helm Of The Eurozone

(King World News)
Jim Rickards – Gold Rise to Continue on Fed Manipulation

(Across the Street)
September 11 – Ten Years Later

(Wall Street Journal)
Banks Raise the Standard for Gold

(Investment News)
Marc Faber’s golden rule: Buy a ‘little bit’ every month




Mark O'Byrne
Executive Director


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