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Gold "Remains Safe Haven" as Euro Sinks, Commodities Fall with Stocks

Commodities / Gold and Silver 2010 May 04, 2010 - 07:31 AM GMT

By: Adrian_Ash


THE PRICE OF GOLD in wholesale dealing rose against all major currencies on Tuesday, hitting new record highs for European investors as stock markets and raw materials sold off worldwide.

The Euro sank through $1.31 for the first time in 12 months, dropping as traders in London – back from the UK's May Bank Holiday weekend – reacted to Sunday's Eurozone-IMF deal to lend €110 billion to Greece.

"At some point, it's going to become evident that the crisis we should be worried about is not the credit crisis, not a financial crisis...but a crisis of high unemployment, low to zero inflation, and very low growth for the foreseeable future," says Michael Crook, a vice president and strategist at Barclays Wealth in New York, in an interview with

"All of those things are bad for gold," reckons Crook, forecasting a "slump" to $800 an ounce.

Crude oil today lost 1.5% vs. the Dollar, while the broader GSCI commodity index dropped 1.3%.

Hitting new all-time highs against the Euro and British Pound, in contrast, gold recorded a fresh 5-month high against the US currency at $1185 an ounce.

France's CAC40 share index sank 1.6% as Australia's resource-heavy All Ordinaries closed 1.1% down for the day.

Gold priced in Australian Dollars – the best-performing "commodity currency" since natural resources turned higher in March '09 – rose to a 5-month high.

"What becomes clear is that gold's continuing upward price trend is anchored in solid fundamentals," says Juan Carlos Artigas of the World Gold Council marketing group, speaking to London's Telegraph newspaper.

"So far, Gold investors have nothing to complain about. Industrial users naturally see it differently," reports Wolfgang Wrzesniok-Rossbach at German refining group Heraeus.

But since the beginning of the Greek crisis, he adds, "physical demand in gold has increased massively."

Short-term, says Wrzesniok-Rossbach, "Gold could see some corrections. But medium and longer term – until, someday, interest rates go up – the metal remains a safe haven."

Major economy government bonds rose further on Tuesday, pushing 10-year German Bund yields below 3.0%.

EuroWeek magazine reported on Friday that investment-bank Lazard has won the mandate for advising on a Greek debt restructuring.

The cost of CDS insurance against a Greek bond default rose back to 6.45%, even after 15 German politicians and business leaders – swiftly followed by Deutsche Bank's CEO Josef Ackermann – publicly stated their intention to buy Greek bonds in the Handelsblatt newspaper.

Silver Prices meantime edged 1.1% lower from Monday's high early, slipping back to last Friday's closing level at $18.70 an ounce.

By Adrian Ash

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 , 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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