History May View ECB’s Draghi As “Currency Forger of Europe”

Today the London Bullion Market is closed for a national holiday.
Friday’s AM fix was USD 1,666.50, EUR 1,329.16 and GBP 1,051.88 per ounce.

Silver is trading at $30.91/oz, €24.77/oz and £19.62/oz. Platinum is trading at $1,550.00/oz, palladium at $647.90/oz and rhodium at $1,025/oz.

Gold climbed $0.80 or 0.05% in New York on Friday and closed at $1,669.80. Silver surged to as high of $30.71 and finished with a gain of 0.52%.  On the week gold climbed 3.3% and silver gained a whopping 9.3%.


Cross Currency Table – (Bloomberg)

Gold hit a high not seen since mid April on Monday, continuing the momentum from last week’s gains as investors expect further monetary stimulus from central banks and become increasingly concerned about inflation.

Consumer price inflation data in the US is due Friday and is expected to move higher on higher fuel and food costs.

There may be more hints of further cheap money from the Jackson Hole Symposium later this week as finance chiefs gather to discuss economic policy behind closed doors.

Monetary risk remains high especially in the euro zone after Jens Weidmann, head of the Bundesbank, sent a shot across the bows of the ECB’s Draghi and likened the mooted ECB bond-buying plans to a dangerous drug. 

Merkel praised Weidmann for speaking out about his doubts and said she saw strong Bundesbank influence within the ECB as positive. But she took care not to voice any support for his criticism of Draghi’s policies.

Weidmann rejected suggestions that he was isolated on the ECB Governing Council in having such reservations. "I hardly believe that I am the only one to get a stomach ache over this," he said.

Alexander Dobrindt, a senior German politician who has been the Executive Secretary of the Christian Social Union of Bavaria since 2009, was more direct, saying Draghi risked passing into the history books as the "currency forger of Europe".

A conservative ally of Merkel, Dobrindy echoed Bundesbank’s Weidmann that Greece should leave the currency bloc by next year.

The comments show the huge divisions in Germany over the debt crisis now in its 3rd year and the understandable concerns of inflation and even hyperinflation. 

The Bundebank and senior politicians and allies of Merkel may thwart Mario Draghi’s big plans to do “whatever it takes” to solve Europe’s financial collapse. 

One way or another, the euro is certain to fall in value in the long term. 


Gold in USD 2 Years – (Bloomberg)

As was pointed out by Merryn Somerset Webb at the weekend (see commentary) the euro has defied negative commentary but the question is for how much longer. 

The fundamentals of the euro are appalling – just to keep eurozone broad money supply from contracting alone will take a whopping €3 trillion.

“The euro is clearly a bad currency by any definition.” While some fund managers advocate shorting the euro, we believe this is a high risk strategy for investors as in the short term the euro could stage a strong rally – should for example Grexit happen. A ‘core euro’ could and would likely become stronger.

Therefore, investors and savers best way to protect against a fall in the value of the euro and indeed other fiat currencies is to have an allocation in physical gold.

US economic data published this week follows.  Today is the Chicago Midwest manufacturing index for July at 1230 GMT. Tuesday is the Case-Shiller 20-city Index and Consumer Confidence.  Wednesday is GDP, Pending Home Sales, and the Fed’s Beige Book. Thursday is Initial Jobless Claims, Personal Income & Spending, and Core PCE Prices. Friday is Chicago PMI, Michigan Sentiment, and Factory Orders.

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

NEWSWIRE
(Bloomberg) — Platinum to Trade at Premium to Gold
Platinum may trade at a premium over gold within six months as a lower supply of the white metal boosts prices, according to Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc.

Platinum may climb to $2,000 an ounce by December, while gold advances to a record $1,975 an ounce, Rhodes said at a conference in Hyderabad, India today. Spot platinum ended at $1,549.75 yesterday after rallying on supply disruptions in largest producer South Africa. Gold was at $1,670.55.


G10 and Precious Metals Currency Ranked Returns – (Bloomberg)

(Bloomberg) — Platinum Prices More Bullish Next Year, Standard Chartered Says
Platinum prices may climb next year on less supply from mines in South Africa, the biggest producer, Jeremy East, global head of metals trading at Standard Chartered Bank, said.

Platinum is more bullish next year because many mines in South Africa will be closing, so supply will be reduced and the market will be more balanced, East said at a gold conference in Hyderabad.

“Tighter regulations and problems at trade unions have created a lot of challenges at the production side,” he said.

Gold may climb to $1,750 an ounce by December because of problems in Europe and a possibility of further stimulus programs to boost economies, he said.

(Bloomberg) — Gold Traders Increase Bets on Price Rise, CFTC Data Shows
Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended Aug. 21, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 130,684 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 16,380 contracts, or 14 percent, from a week earlier.

(Bloomberg) — Silver Traders Increase Bets on Price Rise, CFTC Data Shows
Hedge-fund managers and other large speculators increased their net-long position in New York silver futures in the week ended Aug. 21, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 21,200 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 5,613 contracts, or 36 percent, from a week earlier

NEWS
Gold Surges Amid Inflation Concerns – Wall Street Journal

Gold hits 4-1/2 month high on Fed stimulus hopes – Reuters

Gold Set for Best Year Since 2010 as Stimulus Bets Stoke Demand – Business Week

Merkel tries to calm storms over Greece, ECB policy – Reuters

COMMENTARY
Somerset Webb: Euro defies gravity – but not for much longer – The Financial Times

Keiser Report: Debt Bomb – You Tube

Brimelow: Is Gold Heading To $4,500? – Market Watch

Bundesbank’s Weidmann Warns: Debt Monetization Is An Addictive Drug – Zero Hedge

Republicans tease with gold standard, but idea seen full of bugs – Reuters


 


Stephen Flood

Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.

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