All currencies except for the yen have fallen against gold today. The dollar and sterling have sold off again and the dollar is looking technically vulnerable at 77.61 on the US Dollar Index. Currency markets continue to be the primary focus of markets with growing concerns about competitive currency devaluations. The IMF is now warning of currency wars and the increasing vulnerability of the global financial system.
Gold is currently trading at $1,344.30/oz, €969.14/oz, £847.60/oz.
Gold in GBP – 6 Months (Daily). Click on image to view full size.
Printing money and inflation of the currency is a short term panacea but the medicine may in the long term do more damage than good. This will motivate more defensive investors to allocate more funds to gold.
Gold’s recent rise has been primarily a function of the recent fall in the dollar and to a lesser extent sterling’s fall against the euro and other currencies (see charts). Gold has also been strong in sterling and may challenge the record nominal sterling high of £857.22/oz in the coming days on further sterling weakness.
Gold in Euros – 6 Months (Daily). Click on image to view full size.
Gold remains well below its euro high of €1,040.18/oz and actually fell in euro terms in September. The euro will likely fall again versus gold in the coming months when the euro again comes under pressure due to a continuation, and possible deterioration, of the bank and sovereign debt crisis.
Gold in USD and GBP – 10 Year (Weekly). Click on image to view full size.
The spectre of competitive currency devaluations loomed large for some months but were only recognised by many market participants and commentators recently. Similarly, today the threat of trade wars and capital controls is increasing but remains unacknowledged. The present macroeconomic and monetary conditions are likely to lead to a continuation and possibly a deepening of gold’s bull market in all fiat currencies. However, gold is not rising in value – rather fiat currencies are being devalued and are falling against the finite currency and monetary reserve that is gold.
Silver is currently trading at $22.86/oz, €16.48/oz and £14.41/oz.
Platinum Group Metals
Platinum is trading at $1,697.25/oz, palladium is at $584/oz and rhodium is at $2,175/oz.