Gold Gold surged $23.55 to $926.80 per ounce in trading in New York yesterday and silver surged 50 cents to $17.50 per ounce. Gold and silver have traded sideways in Asia and early trading in Europe. Gold also surged to new record highs in British pounds and in euro. The London PM Fix at 1500 GMT yesterday afternoon was at $925. Gold fixed at new record highs at £473.68 and €626.91. After seeing strength in Europe and Asia while the U.S. was out for Presidents Day, gold continued to strengthen on the U.S. markets return and gold surged on increasing inflation concerns with the commodities complex surging, oil rising above $100 a barrel again and the dollar, stocks and bonds falling. Economics 101 is that weak and declining supply conjoined with strong demand will result in higher prices. Finite natural resources, such as gold and platinum, are being chased by a fastly growing money supply internationally and by fastly growing global population in terms of demographics and wealth. Analysts have continually expected a correction in the gold price in recent months and this has not materialised. Platinum has now hit new record highs for 14 days in a row and this shows how markets, including commodity markets, can often surprise, both to the downside, and to the upside.
Gold Markets were closed in New York yesterday and the action centred on London where gold sold off initially and tested support at $900 prior to rallying strongly and this strength has continued in Asian trading with gold rising above $910 per ounce. Silver traded similarly, testing support just below $17 and then bouncing; in Asian trading silver has risen above $17.20 per ounce. Commodities Surge and Burgeoning Inflation With commodity markets surging internationally, gold is very well supported and looks to be consolidating prior to challenging the recent highs and targetting $1,000 in the coming weeks. Oil is back above $96, wheat is up 90% in the last 6 weeks and the entire complex of base metals and soft commodities are showing strong gains. The rise in prices of commodities will take a few weeks to feed into the supply chain, affect the already embattled consumer and be reflected in inflation statistics. This is obviously very inflationary especially with the Federal Reserve expected to continue cutting interest rates and negative real interest rates in an increasingly stagflationary environment. Money supply growth in the U.S. continues to surge and the reconstituted U.S. money supply (M3) figures show a very inflationary 18% growth. Supply of Gold Decreasing Internationally Meanwhile supply continues to decline and the situation and outlook in South Africa continues to deteriorate and is seriously affecting the supply of gold and particularly platinum. South Africa and indeed most of the major gold producing countries are experiencing a decline in gold production. Indeed China is the only major gold producer in the world to have increased production last year.
Gold was down $4.80 to $902.80 per ounce in trading in New York on Friday and silver was down 12 cents to $17.10 per ounce. Gold has traded sideways to slightly up in Asia and early trading in Europe.
Gold rose in British pounds and fell in euro. The London AM Fix at 1030 GMT this morning was at $905 (down from $909.75). Gold fixed at £464.03 (up from £463.97) and €618.51 (down from €619.76). With U.S. markets closed, gold would be expected to have a quite day but recent volatility may continue especially with the deteriorating situation in South Africa seriously affecting the supply of gold and particularly platinum. Despite Bernanke’s poor outlook for the U.S. economy and the poor economic data (Michigan consumer sentiment fell to its lowest since 1992) last week, the dollar is up this morning. However, the dollar’s recent strength is likely to be short lived and the dollar is likely to weaken materially in the medium to long term in the coming weeks and months.