Today’s AM fix was USD 1,310.00, EUR 962.60 and GBP 768.42 per ounce.
Yesterday’s AM fix was USD 1,282.00, EUR 940.23 and GBP 753.14 per ounce.
Gold has surged over $44 and silver over 70 cents to over $1,314 and $20.46 per ounce or 3% and 4.2% respectively.
Gold fell marginally on profit taking today after posting its biggest one-day rise in nine months. Gold in Singapore fell 0.5% to $1,313.40 by 2:10 p.m., trimming this week’s advance to 2.9%. Gold prices in London ticked lower initially to a low of $1,306/oz prior to quickly moving back above the $1,310/oz level.
Gold is trading near the April highs and is 3% higher this week and on track to post its best week in two months. Investors piled into bullion while selling U.S. government debt and the dollar on concerns about the slowing U.S. housing market, slowing economic growth, rising inflation and geopolitical risk.
Gold in U.S. Dollars - 1 Week (Thomson Reuters)
Escalating violence in Iraq and tension in Ukraine boosted haven demand. Fighting between Ukrainian troops and insurgents ended the very brief cease-fire. NATO condemned Russia for massing soldiers on the two nations’ border. Russia says it isn't concentrating troops along the Ukraine border, just strengthening security.
The situation in Iraq has deteriorated leading to deepening tensions in the region and oil prices steadily marching higher. There are also concerns that commodities collateral fraud in China could lead to a scramble for physical metals - both base and precious metals.
Gold is higher for a third week and headed for the longest run of weekly advances since March. Concerns that borrowing costs in the U.S. will remain low fueled demand for gold bullion as an alternative investment and inflation hedge.
Gold in U.S. Dollars - 1 Month (Thomson Reuters)
The dollar came under pressure this week after the Federal Reserve's comments that it could keep interest rates low in the longer term. The dollar index is headed for its biggest weekly loss since April.
Stocks globally remain “irrationally exuberant” and many indices remain near record highs. They remain undeterred by a second week of violence in Iraq and the risk of conflagration in the Middle East that has contributed to oil prices to nine month highs.
Technical buying also helped lift prices yesterday as the rally sent gold above the psychological level of $1,300/oz and recent stiff resistance at $1,285, near a key Fibonacci retracement as well as its 50 and 100 day moving averages.
Private sector gold demand in China, which last year surpassed India to become the biggest importer and buyer of gold bullion, will fall marginally but remain near record highs, Dr Xin Song, a senior official from the China Gold Association said overnight
Platinum group metals also eased after sharp overnight gains and both remain near recent highs due to concerns about supply from Russia and South Africa.
Conclusion
Sentiment in the gold market has been very poor in recent weeks. Most of the public remains on the sidelines and there is very little positive coverage of gold. Nor is there an appreciation of the scale of economic, geo-political and monetary risks facing investors and savers today.
There remains a fundamental lack of knowledge of the still very strong supply and demand factors driving the physical gold market and a lack of understanding as to why gold remains a vitally important asset to own in a portfolio.
Fiat currencies continue to be devalued. This is leading to more asset bubbles and we know how they end.
Many stock markets are at record highs. Many bond markets are at record highs. Many property markets are at record highs. This makes gold which is nearly 33% below its record high very attractive from a hedging and diversification perspective.
Gold in U.S. Dollars - 5 Year (Thomson Reuters)
Gold Bars At 1.6% and 6 Months Free Storage In Singapore Or Zurich
Fiat currencies continue to be devalued and cash can become ‘trash’ quickly as savers found out to their detriment in the 1970’s. Today, there is also the unappreciated risk of bail-ins. That’s why real diversification remains essential.
In recent days, we have covered economic warnings from the World Bank and the IMF. Warnings of monetary and economic collapse have also come from the Pope and from billionaire publisher Steve Forbes. Indeed, even BOE Governor, Marc Carney in an op-ed about the shadow banking system, which was little commented upon, warned that the “banking system” is “prone to excess and collapse”.
The old Wall Street adage to always keep 10% of your wealth in gold and hope that it does not work remains prudent. As ever, it is safest to hope for the best but be prepared for less benign scenarios.
