Gold Robust and Remains Near Record Highs in Most Currencies

Gold

Gold has recovered from slight falls in Asia and is slightly higher in most currencies this morning – trading at USD 1,172 GBP 773 and EUR 903 per ounce this morning (see Cross Currency Table below). Gold is being supported by the significant risk to the stability of the European monetary union and the wider financial system and this is seeing investors internationally, and especially in Europe, diversify into gold.

Gold in Euros – 5 Day (Tick). Click on image to view full size

Gold initially rallied yesterday as risk aversion increased. The metal touched a new high for the year of $1,191.90 an ounce, although it was back trading around $1,170 through the US and European sessions. Spot gold and US gold futures hit their highest since December 2009 yesterday, with the metal keeping its safe-haven appeal intact due to growing concerns on euro zone debt. Gold’s increasing appeal as a currency resulted in it being one of the few commodities that benefitted from yesterday’s risk aversion – oil, copper and other commodities fell sharply.  Gold priced in sterling, Swiss francs and euros hit record highs and while gold was down by 1%  in dollars, it rose in other currencies.

Gold and the MSCI – 20 Day (Tick) – Reweighted to 100. Click on image to view full size.

Gold’s short term correlation with equities was seen yesterday with gold falling as equities fell (see Gold and MSCI Index charts above and below). However, gold fell by only 1% (in USD) while many equity indices were down by between 2% and 5%. It is worth remembering that gold has outperformed most equity indices in the last week, in the last month and year to date. While gold is correlated with equities it is only in the very short term. Gold can fall when equities fall sharply in turbulent market conditions however it generally falls by less than equities and then tends to recover quicker after sell offs. This has been the recurrent pattern in recent years.

Gold and the MSCI – 10 Day (Tick).Click on image to view full size.

Silver

Silver fell some 4% yesterday but is flat so far today. The gold/silver ratio has risen back to nearly 66 meaning that silver remains good value vis-à-vis gold.

Platinum Group Metals

PGMs were under pressure yesterday with both platinum and particularly palladium falling. Platinum is trading at $1,670/oz marginally up and palladium is currently trading at $509/oz down another 1%. Rhodium is trading at $2,750/oz.

Cross Currency Rates at 1030 GMT – AUD, GBP and XAU Strongest Currencies and JPY Weakest. Click on image to view full size.

Mark OByrne

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