Today's AM fix was USD 1,666.50, EUR 1,329.16, and GBP
1,051.88 per ounce.
Yesterday’s AM fix was USD 1,662.50, EUR 1,324.07and GBP 1,047.57 per
Silver is trading at $30.37/oz,
€24.36/oz and £19.25/oz. Platinum is
trading at $1,541.00/oz, palladium at $642.50/oz and rhodium at $1,025/oz.
Gold climbed $14.60 or 0.88% in New York yesterday and
closed at $1,669.40. Silver surged to a high at $30.81 and finished with a
gain of 2.28%. The precious metals have broken out this week with sharp gains
being seen in all four precious metals.
Silver as expected led the gains and surged 8.55% in
the week, palladium is up 6%, platinum 5% and gold up 3%.
Currency Ranked Returns – (Bloomberg)
Gold gave back some gains on Friday but it’s
still set for its biggest weekly rise in more than 2 months due to the very
Today, US durable goods orders are published at 1230
GMT and weakness would confirm weakness in the US economy and should lead to
further safe haven demand for gold.
The European Central Banker is fighting to save the
European fiscal union and quantitative easing seems certain in Europe.
Investors will wait to see if central bankers are coordinating their efforts
and announce further QE at the same time.
Reuters reported increased demand for bullion in Hong
Kong with one bullion dealer reporting “purchases by investors in the
There are even signs of a pickup in physical demand in
India with strong buying being done by stockists
ahead of the busy marriage season.
The use of the term “perfect storm” by
market participants is a bit clichéd and over used at this stage
however it is appropriate with regard to looking at the fundamentals driving
the precious metal markets and particularly gold and silver.
Dollars – (Bloomberg)
All of the recent focus has been on the Fed and the
will it or won’t it engage in QE3 saga. Many of us said long ago that
some form of QE on a significant scale is inevitable. However, it is
important to realise that the Fed is just one
factor driving precious metals higher.
The Fed is not the be all and end all and while the Fed
can jaw bone and manipulate prices higher and lower in the short and medium
term - in the long term the free market and forces of supply and demand will
Silver Prices in Dollars – (Bloomberg)
There is a frequent tendency to over
state the importance of the Fed and its policies and ignore the
primary fundamentals driving the gold market which are what we have long
termed the ‘MSGM’ fundamentals.
As long as the MSGM fundamentals remain sound than
there is little risk of gold and silver’s bull markets ending.
What we term MSGM stands for macroeconomic,
systemic, geopolitical and monetary risks.
The precious metals medium and long term fundamentals
remain bullish due to still significant macroeconomic, systemic, monetary and
a) Macroeconomic risk is seen in the risk of
recessions in major industrial nations with much negative data emanating from
the debt laden Eurozone, UK, Japan, China and U.S. in recent days.
It remains difficult to pinpoint the nature of the
coming recessions and possibly a Depression and whether it will be
deflationary, inflationary, stagflationary or the
less likely but possible none the less ‘Black Swan’ of
Deflation remains the primary concern of most policy
makers, politicians, bankers and investors.
However, the risk of deflation is a short term one and
the monetary policy response or M means that various forms of inflation
remain the medium and long term threat.
b) Systemic risk remains high as little of
the problems in the banking and financial system have been properly addressed
and there is a real risk of another 'Lehman Brothers' moment and seizing up
of the global financial system.
The massive risk from the unregulated “shadow
banking system” continues to be underappreciated.
‘Financial weapons of mass destruction’ in
the world wide shadow banking system are now estimated at over $60 trillion
in late 2011.
Globally, a study of the 11 largest national shadow
banking systems found that they totalled to $50
trillion in 2007, fell to $47 trillion in 2008 but by late 2011 had climbed
to $51 trillion, just over its estimated size before the crisis.
c) Geopolitical risks are elevated - particularly
in the Middle East. This is seen in the serious developments in Syria and
between Iran and Israel. There is the real risk of conflict and consequent affect on oil prices and global economy.
There are also simmering tensions between the U.S. and
its western allies and Russia and China.
Recent days have seen massive industrial unrest in the
platinum sector in South Africa, the largest producer of platinum in the
world (some 80% of supply) and fifth largest gold producer. There are genuine
concerns that unrest in the platinum sector could spread to the gold sector
with a consequent impact on gold supply.
Resource nationalism is being seen throughout the world
and some developing nations look set to demand higher prices in terms of
debased fiat currencies for their finite natural resources.
d) Monetary risk is high as the policy
response of major central banks to the first three risks continues to be to
be ultra loose monetary policies, ZIRP, NIRP, the
printing and electronic creation of a tsunami of money and the debasement of
Should the MSG risk increase even further in the coming
months than the central banks response will again be by monetary and further
currency debasement which risks currency wars deepening.
This risks the devaluation of all fiat currencies and
serious inflation in the coming months and years.
Cross Currency Table – (Bloomberg)
Therefore, we remain bullish in the long term and advise that investors and
savers should have a healthy allocation of their wealth in gold in a
portfolio to protect against the MSGM fundamental risks.
However, as ever markets are unpredictable and in the short
term can do anything. This is particularly the case today with financial
markets seeing significant volatility. Euro/dollar has been more volatile
than gold in recent days.
We caution that gold could see another sharp selloff
and again test the support at €1,200/oz and
If we get a sharp selloff in stock markets in the
traditionally weak ‘Fall’ period, gold could also fall in the
short term as speculators, hedge funds etc . liquidate positions en masse.
To conclude, always keep an eye on the MSGM and fade
the day to day noise in the markets.
We remain bullish in the medium and long term and those
who maintain an allocation to gold will be rewarded. However, we caution that
there is the possibility of further weakness in the short term.
This seems unlikely due to the bullish technicals having aligned with the fundamentals however
“event risk” is high and it would be foolish to completely
discount the risk of yet one more sell off.
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Republicans Consider Returning To Gold Standard - CNBC
Gold Bulls Strongest In Nine Months As Hoard Builds
Gold hovers near 4-1/2 month high, Fed eyed
Britain's richest 5% gained most from quantitative
easing – Bank of England – The Guardian
Keiser Report: Liquidity Drought
– Max Keiser
Gold moving to the next major target of $4,500 to
$5,000 – Resource Clips
Spam Saves The Day – Zero Hedge
Which Country Goes Bankrupt Next? (Hint: It's Not
Who You Think) – Daily Finance
Indian household savings used to buy gold: RBI