-- Posted Thursday, 13 October 2011 | | Disqus
Gold is trading at USD 1,670.40, EUR 1,216.90, GBP 1,063.81, JPY 128,555.00, AUD 1,643.34 and CHF 1,500.20 per ounce. Gold’s London AM fix this morning was USD 1,673.00, GBP 1,065.74 and EUR 1,218.05 per ounce. Yesterday’s AM fix was USD 1,687.00, GBP 1,070.36 and EUR 1,222.02 per ounce.
Cross Currency Table
Gold is marginally lower in all currencies today and appears to be steadying near four-week highs on further evidence of strong consumer demand in Asia. Market concerns about contagion in the euro zone should prevent significant price falls from these levels.
Jewellers and bullion dealers in India and China continue to stock up prior to their various festivals - such as Diwali in India and Chinese New Year in January 2012.
One of the primary drivers of higher gold prices in recent years has been money supply growth in the US and globally and consequent concerns about currency debasement.
Since 1998, increases in the price of gold have been correlated with increases in global M2. If central banks in both the developed and developing world continue to adhere to highly accommodative monetary policies, global M2 should subsequently rise and support a further increase in gold prices, as it has in the past.
Global Money Supply Growth – 1998 to Today
(Eurozone, US, China, Japan, South Korea, Australia, Canada, Brazil, Switzerland, Mexico, Taiwan and Russia)
Developing China’s M2 money supply has been rising by a large 20% and Russia’s by a very large 30%.
Even developed countries such as Switzerland has seen money supply growth of 25%. Japan’s M2 is gradually moving higher after the ‘Lost Decade’ and after recent events exacerbate an already fragile situation.
Global money supply growth is increasing by 8%-9% per annum. Meanwhile annual gold production is less than 1.5% per annum.
We looked at money supply growth and charts regarding global money supply, debt levels etc in a comprehensive article in early August (‘Is Gold a Bubble? 14 Charts, the Facts and the Data Suggest Not’ - http://www.goldcore.com/goldcore_blog/gold-bubble-14-charts-facts-and-data-suggest-not ) when gold was trading at $1,670/oz or much the same price level as today. The charts and conclusions remain apposite.
In order to fight economic problems brought about due to too much debt, debt based paper and electronic currency has been created at historically high levels. There is no sign of this abating any time soon given the scale of the global financial and economic crisis.
Indeed, shuffling debt from one sector to another and creating more debt to deal with what was essentially a problem of too much debt is making the situation worse and leading to currency depreciation and debasement.
Growth in global money supply, U.S. dollar, euro, pound and all fiat currencies depreciation or currency debasement and massive uncertainty in global financial markets and the real risk of contagion will likely continue to lead investors and savers toward using precious metals, and specifically gold and silver bullion, as stores of value and safe havens.
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NEWS
(Reuters) -- PRECIOUS-Gold steadies as dollar offsets consumer boost
http://af.reuters.com/article/metalsNews/idAFL5E7LD0VX20111013
(Bloomberg) -- Gold Retreats as Commodities Decline After Chinese Trade Expansion Weakens
http://www.bloomberg.com/news/2011-10-13/gold-climbs-for-second-day-as-optimism-on-europe-bialout-fund-boosts-euro.html
(Reuters) -- Gold steady on Europe hopes; physicals help
http://www.reuters.com/article/2011/10/13/us-markets-precious-idUSTRE78M11C20111013
(Bloomberg) -- China Exports Slow on ‘Severe Challenges’
http://www.bloomberg.com/news/2011-10-13/china-trade-surplus-drops-to-lowest-in-four-months-as-export-growth-slows.html
(The Telegraph) -- UK rating downgrade 'unavoidable'
http://www.telegraph.co.uk/finance/financialcrisis/8822965/UK-rating-downgrade-unavoidable.html
COMMENTARY
(The Telegraph) -- Ambrose Evans-Pritchard: Mario Draghi fears Italian debt spiral
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8823122/Mario-Draghi-fears-Italian-debt-spiral.html
(GoldSeek) -- Jim Willie: Euroland & the Gold Rebound
http://news.goldseek.com/GoldenJackass/1318442132.php
(The Telegraph) -- Will Finland be the mouse that roars and be the first to leave the euro?
http://www.telegraph.co.uk/finance/comment/damianreece/8823138/Will-Finland-be-the-mouse-that-roars-and-be-the-first-to-leave-the-euro.html
(24h Gold) -- Fiat Money and the Euro Crisis
http://www.24hgold.com/english/news-gold-silver-fiat-money-and-the-euro-crisis.aspx?article=3651633630G10020
(Politico) -- Lackluster economy could lead to next gold rush
http://www.politico.com/news/stories/1011/65655.html
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Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors’ interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is regulated by the Central Bank of Ireland. The provision of precious metal product or service does not require licensing, authorisation, or registration with the Irish Central Bank and, as a result, it is not covered by the Irish Central Bank's requirements designed to protect consumers or by a statutory compensation scheme
-- Posted Thursday, 13 October 2011 | Digg This Article
| Source: GoldSeek.com
