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Gold has fallen today in all major
currencies except the Swiss franc which has fallen on continued speculation
of pegging the Swiss franc to the euro. Gold is trading at USD 1,754.30, EUR
1,232.10, GBP 1,078.70, CHF 1,349.30 per ounce and 134,357.00 JPY/oz. Gold is
5.1% higher in dollars week to date and 6% higher in euros and 6.6% higher in
pounds or to put it correctly these currencies have fallen in value against
gold.
Cross Currency Rates
Gold’s London AM fix this morning was
USD 1,755.00/oz, EUR 1231.23/oz, GBP 1077.35/oz and gold fell sharply after
the fix.
As we said yesterday there is a risk of a
correction in the light of the CME margin increase but smart money is
positioning itself to buy on the dip.
Physical demand for gold internationally
remains robust - especially in Asia – which will support gold. This is
seen in the premiums remaining elevated in Singapore and Hong Kong. Gold's
discount in Tokyo fell to its lowest since the end of 2010.
UBS confirm this morning what we have been
experiencing in terms of increased customer demand for gold and an increasing
preference for allocated gold.
UBS note that “the move to real assets
such as gold in physical form signifies the heightened state of risk aversion
at present.”
“The gold market remains underpinned
by the movement to physical gold, which has persisted all week .
. . European demand for small bars particularly, but also coins,
remains very strong. As the week has progressed Asian physical demand,
outside India, has been noticeably higher.”
The Swiss franc has fallen by another 0.4%
against gold today and is down 5.7% week to date against gold.
Pegging the franc to the euro would take
time and would face steep legal and political hurdles – a change to the
Swiss constitution would be necessary to begin with.
Gold in Swiss francs – 5 Day (Tick)
A peg may not work as the SNB would have to
provide liquidity to defend the peg and history shows (such as the European
ERM) that pegs are rarely successful in the long term.
The Swiss franc’s reputation as a safe
haven is gradually being lost and if a government and central bank are
determined to debase their national currency and ensure it is a not a global
safe haven then it is within their powers to do so.
Gold on the other hand has been empirically
shown to be a safe haven and monetary asset.
Swiss Francs Performance against G10 and Gold
Unfortunately, many today know the price of
everything and the value of nothing. Gold's value is that it is a safe haven
asset. These are not the claims of a vested interest but an empirical fact
backed up by much international academic research including from Trinity
College Dublin's Dr Brian Lucey and Dr Constantin Gurdgiev.
The wise old adage that you "put 10% of
your wealth in gold and hope that it does not work" has never been more
apt.
Indeed, many would argue that given the
scale of the global debt crisis and the real risk of contagion, that
allocation could be higher.
For the latest news and commentary on gold
and financial markets follow us on Twitter.
SILVER
Silver is trading at $38.32/oz, €26.85/oz and £23.56/oz.
PLATINUM GROUP
METALS
Platinum is trading at $1,791.20/oz, palladium at $740/oz and rhodium at
$1,775/oz.
NEWS
(Reuters)
Spot gold reverse early losses on econ worries
(Reuters)
Rush to gold shakes up staid French market
(Bloomberg)
Gold Pares Best Week Since 2009 as Equities Rally,
Contract Margins Rise
(MarketWatch)
CME: Comex gold margins hiked to protect investors
(Reuters)
A rush for gold trusts in the market maelstrom
(The Economic Times)
Asia physical gold demand strong; Tokyo discount falls
COMMENTARY
(Reuters)
40 Years on from Gold Standard, Bugs Crow
(The Irish Times)
Charlie Fell: Economic environment near perfect for gold
to shine
(King World News)
Dan Norcini: What to expect after short covering and
margin hikes
(CNBC)
Bob
Pisani: Should the World Go Back to the Gold Standard?
(Silverseek)
Ted Butler on Silver - The Public Be Damned
(Reuters)
Precious Metals Rising Like a Hot Knife Through Butter -
(The Telegraph)
Desperate Swiss eye euro peg to repel safe-haven flood
Mark O’Byrne
Goldcore
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