Gold News

Gold "Remains Safe Haven" as Stocks & Commodities Fall, Euro Sinks

Gold rose against all major currencies on Tuesday, gaining value as stock markets and raw materials sold off worldwide.

The Euro currency sank through $1.31 for the first time in 12 months, dropping as traders in London – back from the UK's May Bank Holiday weekend – reacted to Sunday's Eurozone-IMF deal to lend €110 billion to Greece.

"At some point, it's going to become evident that the crisis we should be worried about is not the credit crisis, not a financial crisis...but a crisis of high unemployment, low to zero inflation, and very low growth for the foreseeable future," says Michael Crook, a vice president and strategist at Barclays Wealth in New York, in an interview with TheStreet.com.

"All of those things are bad for gold," reckons Crook, forecasting a "slump" to $800 an ounce.

Crude oil today lost 1.5% vs. the Dollar, while the broader GSCI commodity index dropped 1.3%.

Hitting new all-time highs against the Euro and British Pound, in contrast, Gold recorded a fresh 5-month high against the US currency at $1185 an ounce.

France's CAC40 share index sank 1.6% as Australia's resource-heavy All Ordinaries closed 1.1% down for the day.

Gold priced in Australian Dollars – the best-performing "commodity currency" since natural resources turned higher in March '09 – rose to a 5-month high.

"What becomes clear is that gold's continuing upward price trend is anchored in solid fundamentals," says Juan Carlos Artigas of the World Gold Council marketing group, speaking to London's Telegraph newspaper.

"So far, Gold investors have nothing to complain about. Industrial users naturally see it differently," reports Wolfgang Wrzesniok-Rossbach at German refining group Heraeus.

But since the beginning of the Greek crisis, he adds, "physical demand in gold has increased massively."

Short-term, says Wrzesniok-Rossbach, "Gold could see some corrections. But medium and longer term – until, someday, interest rates go up – the metal remains a safe haven."

Major economy government bonds rose further on Tuesday, pushing 10-year German Bund yields below 3.0%.

EuroWeek magazine reported on Friday that investment-bank Lazard has won the mandate for advising on a Greek debt restructuring.

The cost of CDS insurance against a Greek bond default rose back to 6.45%, even after 15 German politicians and business leaders – swiftly followed by Deutsche Bank's CEO Josef Ackermann – publicly stated their intention to buy Greek bonds in the Handelsblatt newspaper.

Silver Prices meantime edged 1.1% lower from Monday's high early, slipping back to last Friday's closing level at $18.70 an ounce.

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Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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