GoldCore Update: Poor German and UK Data Underlines Sterling and Euro Risk

Gold
Gold rose some 1% in US trading yesterday to close at $1,065.30/oz. It then rallied to over $1,073/oz Asian trading before giving up some of those gains in European trading this morning. Gold is currently trading at $1,066.00/oz and in euro and GBP terms, gold is trading at €779/oz and £685/oz respectively.

The Dow’s close below 10,000 yesterday will make market participants nervous especially from a technical perspective. However, world stock markets have not reacted overly negatively and are mixed this morning.

Concerns about the health of the global financial system due to the risks of sovereign defaults internationally (Iceland, Dubai, some eurozone countries, California etc. ) should result in continuing safe haven demand for gold. Especially as economic data out of the UK and Europe this morning (see news below) shows that the economic recovery is less than robust. The poor data out of the UK and Germany illustrates the continuing challenges facing the UK and the strongest member of the eurozone and may lead to weakening sterling and euro. With the outlook uncertain for two of the major world currencies, gold’s inflation hedging and currency diversification credentials may become increasingly attractive to investors throughout Europe and internationally.

Silver
Silver range traded between $15.14/oz and $15.28/oz in Asia. Silver is currently trading at $15.15/oz, €11.05/oz and £9.71/oz.

Platinum Group Metals
Platinum is trading at $1,490/oz and palladium is currently trading at $415/oz. Rhodium is at $2,375/oz.

News
– Credit rating agency Moody’s says it has put Toyota’s credit rating on review for a possible downgrade warning that the auto giant’s worldwide recalls ‘may significantly damage’ its brand image.

– Britain’s goods trade deficit with the rest of the world unexpectedly widened to its highest in nearly a year in December, after imports from non-EU countries shot up at their fastest rate since March 2005. The figures from the Office for National Statistics also showed that Britain’s trade deficit for 2009 as a whole narrowed for the first year since 1997 after the global recession caused both imports and exports to fall at their fastest rate in over 50 years.

– German exports fell by 18.4% in 2009, the sharpest drop since 1950, new data showed today, as China officially overtook the biggest European economy as the top global exporter.

– Fears that Britain may already be succumbing to a "double-dip" recession materialised as it emerged that 2010 opened with the worst January for the high street since comparable records began 15 years ago.

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Mark OByrne

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