Gold Rises for Fourth Day – IMF $500 Billion Hopes Create Concerns

Gold’s London AM fix this morning was USD 1,664.00, GBP 1,076.53, and EUR 1,289.62 per ounce.

Yesterday’s AM fix was USD 1,657.00, GBP 1,077.09, and EUR 1,290.80 per ounce.


Cross Currency Table – Bloomberg

Spot gold rose on Thursday in Asia and has consolidated on those gains on somewhat subdued trading conditions.

There are hopes that new flows of funding from the International Monetary Fund will help contain the euro zone debt crisis. However, some investors are concerned that the funding is another form of short term debt based panacea and a further currency debasement.  

IMF officials from twenty nations are set to hammer out a plan at a meeting in Mexico on Thursday and Friday.  Another multibillion or even trillion dollar monetary injection into the global financial system may further boost demand for bullion.


XAU-GBP Exchange Rate – Bloomberg

The duty hike in India has decreased gold prices by 1% in Mumbai as the rupee gained 0.5% against the dollar.

Some jewellers think the recent duty may slow down demand and may result in a decrease in imports from the official channels of about thirty banks.  The increased tax may also lead to a tertiary market where people trade amongst themselves and not through dealers.

Traders still do not see the hike dampening the demand for the yellow metal.  India is the world’s largest importer of gold and its households have the largest holdings of the metal, according to data from the World Gold Council, although Chinese households appear to be catching up in their purchases of gold.


Global Gold Demand by World Gold Council – Reuters

In both China and India, gold is popular for cultural, historical and financial reasons.

Gold is seen as a safe haven that will preserve a family’s wealth over generations. There is more trust in gold bullion than paper assets such bank deposits, stocks and bonds as they have protected Chinese, Indian and people throughout the world from periods of deflation (banks and governments can go bust) stagflation (paper money and bonds lose value), and hyperinflation (paper money and bonds really lose value).

While western countries have not experienced the ravages of high inflation, many African (Zimbabwe recently), Middle Eastern (Iran today) and Asian (Thailand, Vietnam, Indonesia, India and many others) economies have.

It continues to be imprudent to ignore the real risk of today’s inflationary monetary policies by western central banks. 

With currency debasement continuing globally, gold remains an essential asset to own.

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

NEWS
(Reuters)
Gold up for 4th day on IMF funding hopes

(Bloomberg)
Gold Futures Rally as Slumping Dollar May Boost Demand for Precious Metal

(Bloomberg)
Gold May Climb on $1 Trillion Lending Increase for IMF, Weakening Dollar

(CNN)
Gingrich: US should reconsider gold standard‎

COMMENTARY
(MoneyWeek)
Frisby: How Will Gold Perform in 2012?

(NY Sun)
Gingrich Goes for Gold‎

(ZeroHedge)
"No Deal" – Greek Bondholders Do Not Think Agreement Can Be Reached Before "Crunch Date"

(KingWorldNews)
John Embry – Gold to Rapidly Triple in Price on This Move

(Reuters)
Analysis: China’s banks ‘lure’ man on the street to Gold

 

 

Mark O'Byrne

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