From Gold Core
Gold in Pounds Rises to New Record High over GBP 944/oz on Stagflation Risk – Moody’s Lists 14 UK Banks for Downgrade Review
Gold is marginally higher in most currencies today as the yen, the dollar and the pound are all weaker.
Gold has reached a new record nominal high in British pounds due to the
growing risk of stagflation in the U.K. and due to Moody’s somewhat
belated threat to cut its ratings on most UK banks. This was not helped
by Chinese ratings provider Dagong Global Credit downgrading the
U.K.’s local and foreign currency sovereign credit rating from AA- to
A+ with a negative outlook.
Cross Currency Rates
The increasingly powerful Chinese credit rating agency warned that the
U.K. government's fiscal deficit is likely to be a very high 9% of GDP
this year and the U.K.'s banking system has a large amount of risk
exposure, which could create risks for the government. It estimates
that about 40% of the banking system's GBP 2 trillion worth of assets
is exposed to risk.
Gold Bullion in British Pounds – 30 Day (Tick)
It is important to remember that gold in sterling’s record today is
only a nominal high. Gold’s British pound nominal high in 1980 was at
GBP 371/oz (21 January 1980) and therefore the inflation adjusted high
is over GBP 1,200/oz.
Gold has had a period of correction and consolidation in sterling
(see chart) and indeed in all currencies in recent months. Even with
gold at record sterling highs at GBP 942/oz and after the recent
gradual gains, gold is only some 14% higher than 12 months ago and only
some 3% above the record nominal highs (GBP 914.77/oz ) seen at the
end of December 2010 – nearly 5 months ago.
Such gradual gains are hardly indicative of “irrational exuberance”, an investment mania or a speculative bubble.
The backdrop of strong physical demand internationally and
especially in Asia, points to a weak and very fragile UK economy and
British bonds and a British pound that are vulnerable to depreciation.
UK investors and savers, like their counterparts internationally,
would be wise to diversify into international equities, international
bonds (high credit; short dated) and gold in order to protect against
stagflation and the continuing debasement of their currency.
Gold is trading at $1,521.60/oz, €1,079.99/oz and £942.98oz.
Silver is trading at $35.68/oz, €25.32/oz and £22.11/oz.
Platinum Group Metals
Platinum is trading at $1,757.25oz, palladium at $734/oz and rhodium at $1875/oz.
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(Financial Times) -- Euro-priced gold jumps to record high
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(Financial Times) -- Keynesians are complacent about the dollar
(Wall Street Journal) -- Mundell - 'Father of Euro': Deflation Risk for the Dollar
(Financial Times) -- Small gains give succour to gold bugs
(Mineweb) -- Hate paper money, love gold. Gold and silver turning up - Puru Saxena
(Financial Times) -- Silver and short covering – a theory
(MoneyWeek) -- How Spain could rip the eurozone apart
(ZeroHedge) -- David Stockman: "Both Parties And The White House Are Advocating A US Default"