Gold Reaches New Record Nominal High at $1,428/oz on Sovereign Debt and Currency Debasement Concerns

 Gold

Gold has reached new record nominal highs (in most major currencies) and silver a new 30 year nominal high due to a variety of macroeconomic and geopolitical factors. Market focus remains on the Eurozone debt crisis but has shifted somewhat to concerns about ultra loose US monetary policy and the likelihood that this will lead to a devaluation of the dollar, inflation and currency debasement.

Gold is currently trading at $1,428.68/oz, €1,067.69/oz and £904.57/oz.

While the euro has bounced on Ireland’s austerity measures – it is likely another dead cat bounce and gold priced in euros looks set to challenge €1,100/oz. Ireland’s budget is a foretaste of what is to come in many EU and western economies in the coming years.

Gold’s bull market will continue as long as there are doubts about the safe haven status of the world’s reserve currency, the US dollar. This is being questioned at the same time that the very survival of the other major reserve currency, the euro, is being questioned. Monetary policy internationally remains ultra loose and does not look set to tighten anytime soon which is a "perfect storm" for higher gold and silver prices.

The opinion that that the precious metals will fall as soon as interest rates begin to rise is false. Gold and silver are actually correlated with interest rates and will likely continue going up as interest rates rise as happened in the 1970s. It is only when interest rates have risen to more normal levels (above 5%) and towards the end of the interest rate tightening cycle that investors and savers will again be rewarded by holding bonds and cash.

Traders and hedge funds scent blood in the silver and gold pits and the massive concentrated short positions of Wall Street banks are under real pressure. The short squeeze long heralded by gold and silver bugs may be coming to pass.

We remain confident in our long held belief that gold will reach its record inflation adjusted high of $2,300/oz and silver at least reach its 1980 record high at $50/oz. This is not a forecast because the future is unknown but the balance of probability and the very strong supply and demand fundamentals suggest this is likely.

Silver

Silver is currently trading $30.60/oz, €22.87/oz and £19.37/oz. 

Platinum Group Metals

Platinum is currently trading at $1,725.75/oz, palladium at $768.00/oz and rhodium at $2,225/oz. 

Mark OByrne

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