Gold in USD, EUR, CHF and USD in May (Daily)

Gold edged down on Friday heading towards its 2^nd week of losses as some investors remain on the sidelines. Traders await clues from US non-farm payrolls data for May at 1230 GMT.

Periphery European bond yields have risen again and unemployment in the Eurozone has risen to a record high. There is a distinct feeling that there is a massive financial volcano that may erupt at any moment.

US data released yesterday showed that economic growth was softer than expected in Q1, with slower factory output and a shrinking job market.  The question is when and how will the US Fed react to more negative news on the US economy? The answer we are confident is more QE and currency debasement.
 
Gold incurred its 4th month of losses in dollar terms which has not been seen in nearly 13 years. However, it is important to put those losses in perspective. It is also important to look at gold’s performance in non dollar terms.

Gold had a gain of 10.2% in 2011 - adding to the 10 years of gains since 2000. Gold then saw a 10.8% gain in January 2012. Since then gold has seen gradual declines in February (-1.5%), March (-5%), April (-.03%)and now the 6% drop in May meaning that gold is now down 0.4% in dollar terms year to date.

Importantly, while gold in dollar terms was down 6% in May, the sharp fall in the euro means that gold has again risen in euro terms and was up 0.4% in euro terms in May – closing over €1,250/oz.

Meanwhile, stocks and commodities had a torrid month with sharp falls seen.

The  benchmark S&P500 was one of the best performing stock markets in the world in the month – it fell by 6.3% in May, its largest percentage drop since September.

The Dow's 6.2% drop and Nasdaq's 7.2% loss are their largest monthly declines in two years.

Thus, even gold priced in the strengthening dollar managed to outperform the leading US indices.

Gold's 0.4% gain in euro terms hedged investors exposed to European stock markets which plummeted. The CAC and Dax (Xetra) were down by 6% and 13.5% respectively. The FTSE Eurofirst was down 13.1% and periphery stock markets fell by even more with Spain's Ibex 35 down 19%.

The FTSE fell 7.7% in May while gold priced in sterling was down by just 1%. Therefore, an investor who was overweight UK equities fared far worse than one who had an allocation to gold.

Asian stock markets also saw sharp falls but gold priced in local currency terms was either marginally higher or lower.

Most emerging market equity indices also had a torrid May.

G10 Currencies and Precious Metals Performance in May 2012

While gold's performance in May was good relative to stocks, it is important to focus on the long term and we are confident that gold will again protect investors from market turmoil in the coming years as it has done in recent years.

It will also protect against currency devaluations and from an international monetary crisis - something we have warned of since 2003.

Bill Gross, who runs the world’s biggest bond fund at PIMCO, said yesterday that the lower quality of sovereign debt represents a threat to the global monetary system.

The global monetary system is facing a seismic change in how it operates and major companies and countries could start to shun sovereign debt in favour of real assets, according to Gross.

‘China, for instance, may at the margin shift incremental Treasury holdings to higher returning commodity/real assets which might usher in a gradual or somewhat sudden reconfiguration of our current dollar-based credit system.'

‘Having a reduced incentive to purchase Treasuries and curtail Yuan appreciation, the Chinese and their act-a-likes may look elsewhere for returns.’

Gross’ comments received a degree of confirmation from the Chinese agency tasked with managing their foreign exchange reserves, SAFE, which overnight said that they will create new ways to invest China’s foreign exchange reserves.

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

Cross Currency Table – (Bloomberg)

OTHER NEWS
IShares Silver Trust Holdings Unchanged at 9,643 Metric Tons

 (Bloomberg) -- Silver holdings in the IShares Silver Trust, the biggest exchange-traded fund backed by silver, were unchanged at 9,643.17 metric tons as of May 31, according to figures on the company’s website.

===========================================================

                    May 31      May 30      May 29       May 25          May 24    May 23

                      2012           2012           2012         2   012              2012         2012

============================================================

Million Ounces     310.035    310.035    309.259    310.714    310.714   310.229

 Daily change            0            776,232 -1,455,513          0          485,182         0

--------------------------------------------------------------------------------

Metric tons       9,643.17   9,643.17   9,619.03   9,664.30   9,664.30  9,649.21

 Daily change         0.00           24.14     -45.27           0.00      15.09      0.00

============================================================

(Bloomberg) -- India Cuts Benchmark Import Price of Gold to $501 Per 10 Grams
 India reduced the benchmark price for import of gold to $501 per 10 grams from $507 earlier, according to a statement from the finance ministry.

The benchmark price for imports of silver was cut to $899 per kilogram from $920 set on May 15, the ministry said.

The benchmark prices are used to set the tax on precious metal imports.

(Bloomberg) -- U.S. Mint American Eagle Gold Coin Sales Rise to 50,000 Ounces
The U.S. Mint sold 50,000 ounces of American Eagle gold coins in May, more than double the month before, as prices declined.

Sales of gold coins climbed from 20,000 ounces in April, the first increase since March, according to the Mint’s website. American eagle silver coin sales were 2.75 million ounces, the highest since January and 81 percent more than April’s 1.52 million ounces.

Gold futures dropped 6 percent last month, the most since December, as the dollar rallied on the worsening debt crisis in Europe. Prices touched $1,526.70 on May 16, the lowest this year, while silver has dropped for three consecutive months.

NEWS
Gold heads for weekly loss despite euro zone woes - Reuters

Gold posts 6 percent loss in May despite daily gain - MSN

S&P 500 Caps Worst Monthly Drop Since September On Data - Bloomberg

Wall Street closes dire month with a whimper - Reuters

COMMENTARY
Gold’s Having An Identity Crisis - MarketWatch

Dr. Gloom mellows but Dr. Doom does not - MarketWatch

Auguries—Terminal Velocity – Resource Clips

Market Chaos & Incredibly Important 200 Year Chart – King World News

Myths and Realities of Returning to a Gold Standard – Zero Hedge

Zoellick: Europe must prepare an emergency plan – The Financial Times

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-- Posted Friday, 1 June 2012 | Digg This Article