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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Plunges as Global Currency Wars Resume and Markets Digest German Decision

Commodities / Gold and Silver 2011 Sep 07, 2011 - 09:39 AM GMT

By: GoldCore

Commodities

Best Financial Markets Analysis ArticleGold is trading at USD 1,843.60, EUR 1,314.10 , GBP 1,155.30, CHF 1,584.10 and JPY 142,390 per ounce. Gold closed marginally lower in all currencies yesterday except for the Swiss franc which fell nearly 7% against gold and other fiat currencies.

Gold’s London AM fix this morning was USD 1,844.00, EUR 1,311.99, GBP 1,153.44 per ounce. Gold fixed lower in all currencies (USD 1,891.00, EUR 1,330.75, GBP 1,172.86 per ounce).


Cross Currency Table

The German constitutional court rejected the challenge against the Eurozone ‘bail outs’ but said that the ruling shouldn’t be seen as “blanket” approval for future bail outs. Going forward Angela Merkel and the German government must seek approval from the Parliament’s budget committee for new guarantees it assumes under the European Financial Stability Facility.

Gold closed in New York at $1,870.70/oz yesterday and then traded sideways prior to sharp selling in Asian trading saw gold fall 2.3% or nearly $50 in minutes ($1,871/oz at 0514 GMT to a low of $1,827/oz at 0523 GMT). The price fall was odd as there was no breaking news or ostensible reasons for the sell off and other markets were unchanged at the time.

Speculation was that the falls were technical in nature after stop losses were triggered.

Gold in US Dollars Spot – 1 Day (Tick)

However, Asian traders spoke of some 4,000 lots of gold being ‘dumped’ on the COMEX and of a “large sell order”.

This would suggest that the sellers may not have been profit motivated and official selling may have been involved.

After the Swiss franc intervention and currency debasement yesterday, market participants are wary of further official government and central bank intervention. With further gains for the Swiss franc artificially capped (at least in the short term), it would be naïve to exclude the possibility of intervention in the gold market and a continuing strategic capping of the price.

“The start of full-on currency wars has started in earnest,” said Maurice Pomery, chief executive at Strategic Alpha, quoted in the front page of the Financial Times today. “After currency wars come trade wars and as we see the exporting world pressured as the developed world contracts, tensions will rise.”

Central banks, from the Swiss National Bank to the Bank of Japan, are openly intervening in the currency markets and devaluing their currencies and therefore may be surreptitiously intervening in the gold market.

The safe haven Swiss franc is now pegged to the not so safe haven euro and Japanese money printing is leading to question marks over the safe haven status of the yen. Therefore, risk averse money is likely to flow into gold.

Gold is an internationally traded currency that is not controlled by any one government and therefore cannot be debased, unlike fiat currencies. A way to control gold (at least in the short term) is by market manipulation and capping or lowering the price at key strategic and psychological moments in order to prevent enthusiasm and the public from seeking out the safe haven.

Reuters reports this morning that analysts believe that “expectations that other central banks may step in to intervene in the currency market” may have contributed to the “restraint” in the gold market overnight.

Given the fact that global currency wars have intensified and will likely escalate in the coming weeks, we should be mindful of peculiar and volatile short term movements that give false signals.

All interventions and market manipulation can be successful in the short term but as ever the real fundamentals of supply and demand will dictate the price of all goods, services, assets and currencies in the long term.

Investors and store of wealth buyers should continue to buy on the dip.

For the latest news and commentary on financial markets and gold please follow us on Twitter.

SILVER
Silver is trading at $40.92/oz, €29.12/oz and £25.58/oz.

PLATINUM GROUP METALS
Platinum is trading at $1,829.50/oz, palladium at $746/oz and rhodium at $1,800/oz

GOLDNOMICS - CASH OR GOLD BULLION?



'GoldNomics' can be viewed by clicking on the image above or on our YouTube channel:
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This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

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WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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 a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

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