Gold is rising like a rocket around the world as Hedge Funds, Banks and even National Treasuries buy the metal and sell the paper. Of course, the man on the street is also buying, but his purchases do not make the movements that are pushing gold in the last week.
WHAT ARE THE REASONS?
There are three major reasons, and they reflect the three major continents.
1. The American Congress is fighting about the Debt Ceiling. This might drop the credit rating of the U.S. Government.
2. The Greeks, Italians and other members of the PIIGS are getting ready to make Europe the “Land of the everlasting debt.”
3. China is watching its population buy everything in sight, thereby ratcheting up inflation.
None of these problems has an easy answer. Result? Buy gold. It will be there when you need it.
Gold Advances to Record on Debt Crisis
By Nicholas Larkin, from Bloomberg
“Gold climbed to a record in London and New York as concern about Europe’s debt crisis spurred demand for the metal as a protection of wealth. Bullion rose to an all-time high in British pounds.
Ireland joined Portugal and Greece yesterday as the third euro-area nation to have its credit rating cut to below investment grade. Concern about default in the euro region, faster inflation and a weakening dollar spurred investors to hold $125.4 billion of assets in exchange-traded products backed by precious metals, and has also sent bullion to an all-time high in euros.
Gold “is still going to go for a significant period of time,” Martin Murenbeeld, the chief economist at Toronto-based DundeeWealth Inc., which manages more than $50 billion, said on July 11. “We’re in a very difficult financial period in the world. You have the European situation. The faith in paper currency is rapidly ebbing.”
Gold futures for August delivery advanced as much as $17.40, or 1.1 percent, to $1,579.70 an ounce and were at $1,573.30 by 7:52 a.m. on the Comex in New York. The previous all-time high was set May 2. Immediate-delivery gold climbed as much as $11.03 to $1,578.72 an ounce, and was last at $1,573.25.
Gold is up 11 percent this year, heading for an 11th straight annual gain, the longest winning streak since at least 1920 in London. The MSCI All-Country World Index of equities gained 1.9 percent in 2011, the Standard & Poor’s GSCI Index of 24 commodities is up 9.2 percent and Treasuries returned 3.6 percent, according to a Bank of America Merrill Lynch index.
Bullion jumped to record 1,123.50 euros yesterday and 988.33 pounds today as European finance ministers failed to present a solution to the financial contagion that’s threatening to spread to Italy from Greece, Ireland and Portugal. Moody’s Investors Service lowered Ireland to Ba1 from Baa3 yesterday, citing the probability the country will require additional official financing. The cost of insuring debt from Italy, Spain and Portugal climbed to records this week.
More than a year after the European Union and the International Monetary Fund gave Greece 110 billion euros ($155 billion) in aid, they’re considering options for additional support as the country’s borrowing costs and indebtedness continue to grow.
The IMF welcomed the commitment by finance ministers of the euro region to safeguard financial stability and pledged to continue working closely with Greece and European partners, managing director Christine Lagarde said yesterday.
“With European sovereign debt fears intensifying again, little clarity on what euro-zone officials intend to do next and cross-asset market confidence taking a bashing,” gold is benefiting, Edel Tully, a London-based analyst at UBS AG, said in a report today. “This should, in theory, be gold’s time to shine as a safe haven and as an alternative currency.”
The metal almost doubled since December 2008 as the Federal Reserve kept interest rates at a record low and governments spent trillions of dollars to prop up the economy after the worst global recession since World War II. Rising consumer prices have prompted at least two dozen nations and the European Central Bank to raise rates this year.
The Fed has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008. Its second round of so-called quantitative easing, known as QE2 among investors, ended in June.
Fed policy makers disagreed on whether additional monetary stimulus will be needed, minutes of their meeting last month showed. A few members noted that “depending on how economic conditions evolve, the committee might have to consider providing additional monetary stimulus,” according to the minutes released yesterday.
“The fragile nature of the U.S. recovery has long meant that the threat of quantitative easing, or money printing and debt monetization, coming to an end was unlikely,” analysts at brokerage GoldCore Ltd. in Dublin said in an e-mail. “Gold is essential financial insurance and will protect people from these worst case scenarios — as it has done throughout history.”
Silver for immediate delivery in London rose 1.6 percent to $36.6744 an ounce, taking its gain this year to 19 percent. It’s the best-performing precious metal this year even after slumping as much as 35 percent from a record $49.79 an ounce set April 25 as Comex’s owner, CME Group Inc. (CME), raised the cost of making new speculative positions.
While demand for photographic film has waned in recent years, silver found new uses in everything from solar panels to plasma screens.
Palladium for immediate delivery in London increased 1.2 percent to $774.75 an ounce. It has dropped 3.4 percent this year after almost doubling last year. Platinum was 0.9 percent higher at $1,746.50 an ounce, cutting its 2011 decline to 1.3 percent. Platinum and palladium are mainly used in jewelry and pollution-control devices in automobiles.”