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Weak Dollar? Gold Hits New Record Highs vs. Euro Even as German Equities Bounce 6%

Gold Prices shot to new record highs vs. the Euro currency on Thursday – and came within spitting distance of new Dollar and Sterling highs, too – as weak US housing data failed to dent the sharpest one-day gains in Europe's stock market's since the Tech Crash bottomed out in March 2003.

US equities were mixed, meantime, trading 0.6% higher on the S&P 500 by lunchtime in New York.

"US Gold surges near record high on lower Dollar," reported Reuters as Comex Gold Market futures jumped 3% to $910 per ounce today. But even as the Euro rose to a 10-day high above $1.4730 on news that US home sales fell at their fastest pace last month in 25 years, the largest gains in gold came for European investors.

By the PM Fix in London, the Gold Price in Euros had reached €617.95 per ounce, beating the previous all-time top of Jan. 15th.

British investors and savers wanting to Buy Gold today, meantime, saw the price come within 0.8% of a new record high at £462 per ounce.

But you wouldn't know that from listening to the major newswires or even most financial professionals. "Neal Greenberg, trader with RBC Proprietary Trading in Red Bank, New Jersey, said that Gold rose on the back of a sharply lower Dollar," Reuters went on.

"The main reason why gold is going higher is because of the economic difference in this country [the US] as supposed to the rest of the world," Greenberg claimed.

"While Europe is keeping rates steady, we keep cutting them. Obviously, the Dollar's getting hit again."

Such analysis seemed fair early Thursday after Axel Weber – a member of the European Central Bank – repeated the ECB's key concern was inflation.

Head of the ECB, Jean-Claude Trichet, also said today that "during periods of significant market correction and turbulences, it is the duty of the central bank to solidly anchor inflation expectations to avoid further volatility."

But with the region's money supply continuing to grow at the fastest rate in more than three decades – and with Germany's West LB bank now put on "watch" for a downgrade of its credit rating after losing €1 billion in 2007 – the same pressures hitting the US economy also apply to the Eurozone.

In Paris today Societe Generale, the second-largest French bank, admitted that the trader who ran up losses of $7.1 billion betting on stock-market futures was a "relatively junior" 31-year old acting entirely alone.

Several senior managers had already quit over the affair when it was announced Thursday morning, yet the scandal failed to stall a record rebound in French equities today.

By the close in Paris, the Cac40 stood more than 6% higher at 4,915. The French stock market remains one-fifth below its seven-year top of last June, however.

In Frankfurt the Dax leapt more than 4% higher at the open today, extending its gains to almost 6% by the close. The FTSE100 in London recovered 266 of the 850 points it's lost since the start of this month on plans for a bank-funded bail-out of the world's ailing bond insurance giants, MBIA and Ambac.

"The Fed is cutting rates to stimulate the economy, but times of crisis usually means investors head into gold," said Peter Hambro – head of the eponymous one-million-ounce gold miner today. "And during this – one of the most turbulent weeks of even my turbulent life – gold has outperformed."

Based in London but mining mostly in Russia, Hambro agrees with Goldman Sachs' recent $1,000 target for Gold Prices by the autumn. But pointing to the way inflation plus economic stagnation leads to much higher prices for real assets, he believes Gold could go further.

"In my view there is the possibility of stagflation on a worldwide scale," he told The Telegraph today.

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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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