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Gold "Protects Against Turmoil" as New Euro & GBP Records Set at Fix

Commodities / Gold and Silver 2010 Mar 02, 2010 - 08:34 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD rose against all major currencies early Tuesday bar the Canadian and Aussie Dollars, as world stock markets rose together with crude oil and base metals, and government bonds ticked lower.

The US Dollar eased back on the forex market, but the price of gold in both Euros and Sterling still hit new all-time highs at the 10:30am Gold Fix in London.


Recorded at €826.97 and £747.43 per ounce respectively, Tuesday morning's Gold Fix stood 9% higher in Pounds and 8% higher in Euros from the start of the year.

Priced in Dollars, gold has gained barely 1%.

"In US Dollar terms," says one London dealer in a note, "gold is looking to break resistance at $1125 – a formidable level over the month of February."

"[Monday was] the third up day in a row off of $1088," adds bullion-bank Scotia Mocatta's latest analysis. "The risk is for higher gold prices while $1088 holds the base."

"The Dollar's fundamental problems remain a current issue," says MKS Finance, a division of the Swiss refining group in Geneva, "and while the precious metals are hindered by the greenback's current strength, one could ask what will be the precious metal's long term prospects should Eurozone and American fiscal worries continue."

Greece today delayed announcing a date for its next government bond auction, telling potential creditors that it is "waiting a bit to finish with the announcement of the [austerity] measures" which have already led to a general strike by civil servants.

Greece needs to raise a further €41 billion for its planned 2010 deficit of €54bn. Around €20bn worth of its outstanding bonds will mature over the next 3 months, note the Associated Press.

"Before there are discussions about aid, we expect Greece to complete its homework on consolidation policy," said German foreign minister and vice-chancellor Guido Westerwelle this morning.

"I regard all other discussions at the moment as inappropriate."

The Financial Times meantime notes that bonds issued by Spain's Instituto Credito Oficiale (ICO) – now being issued to finance loans of up to €200,000 to small business and the self-employed, and "which carry the full guarantee of the Kingdom of Spain" but don't show on the state balance-sheet – are falling price relative to Spanish government debt, as well as other Eurozone bonds.

"This could be considered unusual since both of the bonds should, in theory, trade within a similar range on account of their respective government guarantees."

Here in London, meantime – and after the Pound suffered its worst one-day drop on the currency market since October – "Is this the start of a Sterling crisis?" asks the Daily Telegraph online, noting that "The experience of the past 24 hours is not encouraging."

Starting with the Northern Rock collapse of Sept. 2007, the British Pound in fact fell further over the following 12 months – both against a basket of the other major currencies and gold bullion – than it did during the ERM exit of 1992, the IMF crisis of 1976, or after the final Gold Standard suspension of Sept. 1931.

"The status of gold is very clear," said Fortis Nederland's Wallace Ng to Bloomberg in Hong Kong today.

"It's security against any financial turmoil in any country."

"Gold won't necessarily make you rich," writes Lawrence Williams at South Africa's MineWeb today, "but from time to time it will move above and below the inflationary trend and these movements, if judged correctly, offer buying and selling opportunities which can improve your wealth."

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


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