Gold hits new record on Euro fallout

The price of gold surpassed its 2009 peak today, hitting an all-time record high of $1,232.50 an ounce. The reason for this is quite simple - Europe is printing nearly $1 Trillion dollar to stem their financial crisis and the markets think all that money will be wasted.
This is leading people to blasphemous conclusions.

“People are in panic mode,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There is absolute panic over the risk of contagion spreading to other countries in Europe. Yields on Treasuries are so low, people are starting to look to gold as an alternative.”
“This is the beginning of the unraveling of fiat currencies,” said Michael Pento, the chief economist at Delta Global Advisors Inc. in Huntington Beach, California. “Money has to be backed by something. People are beginning to realize that gold is the world’s reserve currency.”
“When the sovereign-debt crisis laps onto our shores, there will be a global realization that gold, not the dollar, is the world’s reserve currency,” Pento of Global Advisors said.

The fact that gold has been rising, not dropping, while the Euro has been crashing, is evidence that gold is now trading like a currency rather than a commodity.
Gold mining stocks also rocketed higher today.

For nearly a decade, the main alternative to the dollar has been the Euro. Before that it was the Pound.
Now both the Pound and Euro are in serious trouble. This can be easily seen by looking at gold prices in Euros.

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If should be noted that the crisis in Europe isn't the only reason for gold's 9-year climb. Official gold sales from the world's central banks have dried up, while worldwide gold production has been dropping.

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You might think this new high in the price of gold has gold bugs throwing their every dollar at the yellow metal in a mania. You would be wrong.

Consider the average recommended gold market exposure among a subset of gold-market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). It currently stands at 46.6%, which means that the average gold timer is still allocating more than half of his gold portfolio to cash.
Today, the gold bugs are surprisingly subdued, and that is a positive omen.

As long as the central banks and governments of the world continue to throw massive amounts of money at their economic problems without making real reforms in the financial system, gold (and silver) will continue to go higher.

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I think so

and is it me, or does it seem "forces" are trying to depress gold prices? I think until Greece actually defaults, this currency swap game will only continue to force gold higher as save haven.

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Some History on Gold

The total inventory out there today is around 55 tons. When Alexander the Great defeated Persia,he captured 14 tons, half of the known gold except for China. So 2340 years, only doubles gold inventory. When miners in Peru tear apart the jungle, they may mine an ounce a day. Gold is fundamentally scarce.

The Wealth of Nations has a long discussion on gold. Smith made the point that all currencies follow the 'money price of gold' in an endless sea-saw. Jefferson said that this nation must make a choice between a National Bank and a paper currency to do both is to court 'ruin'.

When Nixon closed the Gold Window he could not keep up with the deliberate runs by the French. In a few months, he would impose wage and price controls. In a 1975, you could buy coins and bullion again. The biggest lie governments and central banks tell, is that they will manage gold prices.

 Full Disclosure: I have owned a gold producer mutual fund since 2003 when my favorite Vice President told the Secretary of Treasury,"Deficits don't matter." The converse of that statement is that the dollar is garbage.

 

I do not believe in Gold Standards because of way Hanna and the Republican Party took the U.S. off silver.

 

 

 

 

 

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Burton Leed

"Panic buying" of gold in Europe

The continent that has seen multiple cases of hyperinflation over the last century, is worried again.

(Bloomberg) -- Muenze Oesterreich AG, the Austrian mint that makes the best-selling gold coin in Europe and Japan, said sales have spiked in the last three weeks on fears that Greece’s debt problems will hurt the euro.
“We sold more than in the first quarter of the year,” Vienna-based Marketing Director Kerry Tattersall said in a telephone interview. “It represents panic buying.”
The mint sold 243,500 ounces since April 26 compared with 205,300 in the first quarter, according to Tattersall.

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More gold panic buying in Europe

The worry about a collapse of the Euro could be a game changer for gold.

Panicking German dealers and banks have been desperate to get their hands on krugerrands, the world's most popular gold coin.
"We have some extraordinary sales to German customers," says Deborah Thomson, the Rand treasurer. The refinery, which usually sells 2,000 coins to each customer at a time, says that last week it received an order from one German bank for 30,000 coins. Another bank requested 15,000 coins.
Frank Ziegler, head of precious metals at BayernLB, one of Germany's largest wholesale suppliers of gold, says: "People are buying krugerrands like crazy."
...
The appetite for coins has been so intense that shortages are developing. "In the European market there is a shortage of krugerrands," says Mr Ziegler. As a result, the premium paid for krugerrands in the secondary market has risen from about 2 per cent to 6-8 per cent.
The interest has not been confined to coins and bars. ETFs, which hold physical gold and issue shares to investors, have also seen large inflows.
The world's largest, the SPDR Gold Trust, has increased its holdings by 50.5 tonnes in the past two weeks, more than in the first four months of the year.
Other funds have also been building their positions. Gijsbert Groenewegen, at Silver Arrow Capital, a New York-based precious metals hedge fund, says investors have been flooding into his fund "in swarms" in the past week.
...
One bullish factor is the lack of physical gold, or scrap, being sold, despite the high prices. In Asia, where the gold market is especially sensitive to price, a surge in prices usually leads people to sell their old gold for scrap, boosting supply.
But that is not really happening yet. Afshin Nabavi, head of trading and physical sales at MKS Finance, a gold refining and trading company in Geneva, says: "Sales of scrap have picked up but not that much."

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what do you know about GLD ETF, ETFs in general (paper gold)?

I've read a horde of reports that there "isn't enough Gold in the world" to cover the various ETFs and so on and the only way is to buy physical gold.

Yet....my understanding on the GLD ETF is they horde physical gold on a 1:1 to back up the ETF.

What's truth? So many rumors when it comes to gold.

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