Gold News

Gold Offers "Clear Security Against Turmoil" as London Fix Sets New Euro & British Pound Records

Gold Prices rose across the board early Tuesday, gaining against all major currencies bar the Canadian and Aussie Dollars as world stock markets rose together with crude oil and base metal prices.

The US Dollar eased back on the forex market, but the price of gold in both Euros and Sterling still hit new all-time highs at the 10:30am Gold Fix in London.

Recorded at €826.97 and £747.43 per ounce respectively, Tuesday morning's Gold Fix stood 9% higher in Pounds and 8% higher in Euros from the start of the year.

Priced in Dollars, gold has gained barely 1%.

"In US Dollar terms," says one London dealer in a note, "gold is looking to break resistance at $1125 – a formidable level over the month of February."

"[Monday was] the third up day in a row off of $1088," adds bullion-bank Scotia Mocatta's latest analysis. "The risk is for higher Gold Prices while $1088 holds the base."

"The Dollar's fundamental problems remain a current issue," says MKS Finance, a division of the Swiss refining group in Geneva, "and while the precious metals are hindered by the greenback's current strength, one could ask what will be the precious metal's long term prospects should Eurozone and American fiscal worries continue."

Greece today delayed announcing a date for its next government bond auction, telling potential creditors that it is "waiting a bit to finish with the announcement of the [austerity] measures" which have already led to a general strike by civil servants.

Greece needs to raise a further €41 billion for its planned 2010 deficit of €54bn. Around €20bn worth of its outstanding bonds will mature over the next 3 months, note the Associated Press.

"Before there are discussions about aid, we expect Greece to complete its homework on consolidation policy," said German foreign minister and vice-chancellor Guido Westerwelle this morning.

"I regard all other discussions at the moment as inappropriate."

The Financial Times meantime notes that bonds issued by Spain's Instituto Credito Oficiale (ICO) – now being issued to finance loans of up to €200,000 to small business and the self-employed, and "which carry the full guarantee of the Kingdom of Spain" but don't show on the state balance-sheet – are falling price relative to Spanish government debt, as well as other Eurozone bonds.

"This could be considered unusual since both of the bonds should, in theory, trade within a similar range on account of their respective government guarantees."

Here in London, meantime – and after the Pound suffered its worst one-day drop on the currency market since October – "Is this the start of a Sterling crisis?" asks the Daily Telegraph online, noting that "The experience of the past 24 hours is not encouraging."

Starting with the Northern Rock collapse of Sept. 2007, the British Pound in fact fell further over the following 12 months – both against a basket of the other major currencies and Gold Bullion – than it did during the ERM exit of 1992, the IMF crisis of 1976, or after the final Gold Standard suspension of Sept. 1931.

"The status of gold is very clear," said Fortis Nederland's Wallace Ng to Bloomberg in Hong Kong today.

"It's security against any financial turmoil in any country."

"Gold won't necessarily make you rich," writes Lawrence Williams at South Africa's MineWeb today, "but from time to time it will move above and below the inflationary trend and these movements, if judged correctly, offer buying and selling opportunities which can improve your wealth."

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Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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