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Today's AM fix was USD 1,579.50, EUR 1,288.65, and GBP
1,012.57 per ounce.
Yesterday’s AM fix was USD 1,595.00, EUR 1,296.85 and GBP 1,020.47 per
ounce.
Silver is trading at $27.09/oz,
€22.23/oz and £17.43/oz. Platinum is
trading at $1,415.75/oz, palladium at $574.18/oz and rhodium at $1,190/oz.
Gold fell $7.80 or 0.49% in New York yesterday and
closed at $1,581.70/oz. Gold dropped off in later trading in Asia and then
recovered losses for the open in European trading prior to further weakness
where it is trading just below $1,580/oz.
 
Cross Currency Table – (Bloomberg)
Gold hovered near $1,580/oz
today after dropping marginally the previous session when U.S. Federal
Reserve Chairman Ben Bernanke gave no clues of any monetary stimulus
measures.
However the trading action was positive with gold
falling sharply prior to seeing a v shaped bounce back to go positive on the
day prior to weakness at the close.
Bernanke reiterated once again the stance that the Fed
is prepared to take further action should the economic conditions worsen, but
offered no clue on the timing of such action.
We have long said that the conditions would worsen and
QE3 was inevitable.
Market participants and traders will wait for
Bernanke’s testimony at 1400 today for more clues but those with a more
long term horizon will again diversify on the dip.
Bullish for gold was the Fed chairman’s admission
that policy makers are studying options for further easing that could be
deployed. Tools available include further purchases of assets, reducing the
interest rate on bank reserves kept at the Fed and altering its
communications on the outlook for rates.
The Dollar Index, a gauge against six counterparts,
fell for a fourth day.
Gold may also receive safe haven buying from the LIBOR
scandal and crisis which deepened yesterday when Bernanke’s testimony
conflicted with the Bank of England’s King and Bernanke appeared to
admit that Fed employees were involved in the manipulation of Libor.
Bernanke said yesterday that “[In 2008] there was
active effort to report to all relevant policy makers.” While King had
said that “the first I knew of alleged wrongdoing ... was two weeks
ago”.
Citi, Bank Of America, and JPMorgan appear to be set to
be dragged into ‘Lieborgate’ as
Congress is expanding the Libor probe to the big three U.S. domestic banks.
Also extremely bullish for gold was Bernanke’s
admission that Libor is “structurally flawed” and an
international effort would be needed to restore the rate’s credibility
as the leading benchmark for mortgages, derivatives and corporate lending
around the world.
The Libor scandal is further eroding confidence in the
global financial system and will lead to safe haven gold demand.
While official inflation statistics continue to show
inflation as benign, inflationary pressures continue to build –
especially with regard to the essential that is food.
Global Commodity Prices & Data – (Bloomberg)
Year to date, food staples such as corn have risen by
18%. Soybeans have surged 32%.
Bread is set to get even more expensive in the coming months
as wheat prices have surged 34% year to date. It is worth remembering that
soaring food and especially food prices led to the ‘Arab spring’
and the various popular revolutions in the Middle East and North Africa.
Hungry people do not stay hungry for long. People
suffering from inflation and receiving very low yields on deposits in unsound
banks will continue to turn to gold as a store of value.
'Game Changer' For Gold In UK As New Regulation Favours Gold
Gold as an investment or savings mechanism has been
frowned upon by the financial services industry in the UK and internationally
for many years.
This was due to the bursting of the gold bubble in 1980
(when Volker increased interest rates to nearly 20%), the poor performance of
gold in the 1980’s and 1990’s and the superior performance of
cash, bonds and equities in that 20 year period.
XAU/USD Rate – (Bloomberg)
It was also due to the fact that gold bullion was not
lucrative for financial advisers and financial institutions such as
stockbrokers and banks. Gold bullion is bought as a long term investment or
store of value and as financial insurance. It is normally bought and kept and
owned by the owner for a long time – even passing it onto children.
This means that financial institutions do not make
continuing commissions which is their stock and trade. Gold bullion is also a
very low margin business when compared to structured products and the many
investment products with non transparent and often
very high charges and fees.
However, the poor performance of the financial services
industry with a series of misspelling and other scandals and the abject
failure of much of the industry to have the fiduciary interest of their
clients at heart means that the UK’s FSA is set to bring in legislation
that will protect the retail investment public.
The Financial Services Authority (FSA) primary role is
to make retail markets for financial products and services work more
effectively, and so help retail consumers to get a fair deal.
In June 2006, the FSA created its Retail Distribution
Review (RDR) programme which they are enacting in
order to enhance consumer confidence in the retail investment market. The RDR
has a target for full-implementation of 31 December 2012.
The RDR is expected to have a significant impact on the
way in which financial services are delivered to retail investors in the UK.
The primary delivery mechanism of financial services to retail customers is
via approximately 30,000 Independent Financial Advisers (IFAs) who are authorised and regulated by the FSA. They are expected to
bear the brunt of the force of the RDR.
Gold bullion is set to benefit from the axing of
commission for IFAs and the implementation of the RDR “should be
regarded as a game changer” for gold as an
investment in the UK, according to the World Gold Council.
In its latest report ‘Gold as a strategic asset for UK
investors’, the World Gold Council rightly points out
that the current commission structure in the UK narrowed the range of
products recommended “which has been suboptimal for clients’ risk
preferences and diversification prospects”.
The World Gold Council backs the new regulation,
arguing that it will lead to a broader range of assets including gold being
recommended by advisers.
“Re-focusing the advisory community and the
clients it serves on the importance of asset allocation decisions, not just
product selection, sits at the heart of wealth protection” it correctly
says.
“Encouraging a broader approach to investing
across a wider range of asset classes, based on an understanding of the
long-term increase in cross correlations within global investment assets,
will be a positive development.”
Much financial academic literature has shown how gold
can serve as a portfolio diversifier, preserver of wealth and a risk
management vehicle.
“During most market crises over the last 25 years,
gold has consistently increased portfolio gains or reduced its losses,”
according to the report.
Managing director of investment Marcus Grubb, says: “These extremely challenging times mean
it’s impossible to quantify the risks for UK investors. They are facing
an unprecedented combination of threats to their assets including extreme and
unexpected market shocks that can trigger widespread value
destruction.”
“As UK investors reduce allocations to
traditional investments such as equities and bonds and increasingly dash to
cash, they face a double whammy, with the potential for stagnation of capital
due to the lack of returns from cash and the increased possibility of
inflation as a result of ongoing monetary stimulation.”
“In this context, an urgent reappraisal of how to
protect and create wealth is required and our latest research reinforces
gold’s credentials as a core portfolio asset which reduces losses and
preserves wealth.”
The RDR regulation is another step in gold slowly going
from the fringe - with a small minority of people having any allocation to
gold - to the mainstream.
The developments in the UK are likely to be seen in
other countries with similar financial regulations and will further help
position gold as a primary asset – alongside equities, bonds and cash.
NEWSWIRE
(Bloomberg) -- Malaysia Plans Mercantile Exchange for Gold, Precious
Metals
Prime Minister Najib Razak
announces plan in speech in Kuala Lumpur.
(Bloomberg) -- RBS Says Platinum Will Average $1,650 an
Ounce in Fourth Quarter
Platinum will average $1,650 an ounce in the fourth quarter, Royal Bank of
Scotland Group Plc said today in an e-mailed
report.
“Importantly, costs have continued to increase in
2012,” the bank said. “A simple cost-price comparison would
suggest that as much as 500,000 ounces of production capacity is uneconomical
at current prices and, as such, has the potential to be suspended. In reality
though, producers take a number of other factors into consideration before
they take such drastic measures.”
For breaking
news and commentary on financial markets and gold, follow us on Twitter.
NEWS
Gold steady above $1,580 on Fed stimulus uncertainty
- Reuters
Gold retreats amid China house price gain
- MarketWatch
Bernanke offers gloomy view but few new hints on
easing - Reuters
Gold Recovers as Bernanke is Mum on Fed Actions
- Bloomberg
COMMENTARY
The “Central Banks’ Central Bank”
Slams the Federal Reserve – The Big Picture
Hathaway: Gold Manipulation - Banks Are Agents Of
The State – King World News
Santelli On 'The Smoking Gun' – Zero Hedge
The biggest misconception in gold and other factors
driving the metal - Mineweb
Mark
O’Byrne
Goldcore
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