Gold Rises 1.8% As Central Banks Further Debase Currencies – Gold Safe Haven in November

Gold is trading at USD 1,746.90, EUR 1,295.30, GBP 1,111.10, CHF 1,589, JPY 135,700 and AUD 1,706.4 per ounce.

Gold’s London AM fix this morning was USD 1,750.00, GBP 1,113.02, and EUR 1,298.03 per ounce.

Yesterday’s AM fix was USD 1,704.00, GBP 1,095.61, and EUR 1,282.46 per ounce.


Cross Currency Rates

Gold is marginally higher today in dollars after yesterday’s nearly 2% gain. Yesterdays’ PM fix was not the same as the AM fix after the central bank intervention saw gold surge nearly 2%. The highly coincidental exact AM and PM fixes for 2 consecutive days may have been an unusual anomaly.

Gold is at a 2-week high today as inflation concerns saw gold rise sharply after the Federal Reserve and the world’s major central banks took coordinated action to prevent the euro-zone debt crisis from igniting a global financial meltdown.


Gold in November in USD – 30 Days (Tick)

The U.S. Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said they would lower the cost of existing dollar swap lines by 50 basis points from next Monday (December 5) and arrange bilateral swaps to provide liquidity for other currencies. 

It was a desperate move to prevent what BOE Governor, King, this morning called a ‘systemic crisis’.

China’s central bank cut reserve requirements for commercial lenders yesterday for the first time in three years, in order to ease liquidity issues in the Chinese financial system.

The joint action by the world’s major central banks to boost dollar liquidity and provide cheap dollar funding to European banks facing a ‘Lehman moment’ spurred ‘risk on’ rallies in commodities and equities.

Equity indices in the EU, US and Asia surged after the measures but already nervousness has crept back in and the CAC and DAX are lower this morning.  

The dawning realization that money markets were very close to complete collapse will likely lead to increased risk aversion again and continuing safe haven demand for gold.

The coordinated central bank action will result in a further increase in the global money supply and the consequent debasement of fiat and electronic currencies and inevitable devaluation of the dollar and all major currencies.

Volatile November Sees Gold Protect Again
Despite November being an extremely volatile month which saw sharp losses in many bond markets and all major equity indices internationally, gold was higher in all major currencies in November.


Gold in November in GBP – 30 Days (Tick)

Gold ended November with a 1.9% gain in US dollar terms, the seventh month of the dollar falling against gold so far this year.

The euro fell 5% against gold in November. The British pound fell nearly 4% against gold.

The Aussie dollar fell nearly 6.5% and the South African rand by 5%.

Thus, gold again protected investors and savers internationally from the global financial crisis.


Gold in November in EUR – 30 Days (Tick)

Gold is now more than 20% higher in dollars and 18% higher in euros and pounds in 2011.

It is only 9% below the record nominal high of $1,920/oz reached in September and given the degree of systemic and monetary risk in the world this price level will likely again be reached by early 2012.

Global Allocations to Gold Remain Miniscule
Global ETF holdings of gold topped 70 million oz for a second day in a row, marking not only a new record high, but meaning that ETF holdings of gold are double those held by the Chinese central bank and are just a few metric tonnes behind those of France, the world’s 5th largest official holder of bullion (2,435T).

The risk that ETF gold holdings could be sold resulting in a lower gold prices is over stated.

While the figures sound large in tonnage terms, in dollar terms they are very small – especially when compared to the size of global equity, bond and foreign exchange markets. 

The very limited supply and rarity of gold means that the increase in allocations to gold from miniscule levels is sustainable and will likely continue for many years given the radically changed nature of the global financial and economic landscape.

Demand has increased in recent months and years but is increasing from a tiny base.

HSBC estimated in December 2010 that gold remains less than 0.14% of global investable assets. 

Therefore, most analysts involved in the gold markets believe that this is not a short term blip rather we are seeing a sustainable trend and investment and monetary demand is set to remain very robust in the coming years.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

SILVER 
Silver is trading at $33.15/oz, €24.57/oz and £21.08/oz 

PLATINUM GROUP METALS 
Platinum is trading at $1,554.25/oz, palladium at $619.50/oz and rhodium at $1,575/oz. 

(Bloomberg)
SPDR Gold Trust Holdings Increase 1.21 Metric Tons

(TheStreet.com)  
Gold Prices Soar as Central Bank Actions Pummel U.S. Dollar

(Bloomberg)
Billionaire Prokhorov Touts Gold For Perplexing Times

COMMENTARY
(MarketWatch)
Gold likely to be higher at year’s end

(ZeroHedge)
Of Imminent Defaults And Self Deception. Kyle Bass Prepares For The Worst

(ZeroHedge)
"China Will Not Hesitate To Protect Iran Even With A Third World War"

(SeekingAlpha)
Currency Wars: Euro Descending But What Of Gold?

(Yahoo Finance)
Ron Paul Comments on Fed Actions in Europe

(Bloomberg)
Safe Havens for Billionaires: Treasuries 30%, Art 30%, Gold 20%, Other 10%

 

 

Mark O'Byrne

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