From Gold Core
Portuguese Bonds in Melt Down – Euro Gold Rises to €1,056/oz - 3% From Record Nominal High on Contagion Risk
Gold is trading at $1,515.06/oz, €1,055.42/oz and £945.73/oz.
Gold is marginally higher in most currencies today and has risen a
further 0.55% against the euro to EUR1,056/oz. It is just 3% from the
record nominal high in euros at €1,087/oz due to the risk of contagion
in the Eurozone.
Gold in Euros – 1 Year (Daily)
The Moody’s downgrade of Portugal has led to a brutal sell off in
Portuguese debt in morning trade which has seen Portuguese 10 year bond
yields surge from 11.02% to 12.23%. Yields on Portuguese two-year notes
soared 212 basis points to over 15.14 percent. There is increasing
speculation that another downgrading of Ireland is imminent and
Ireland’s 10 year yield has surged to over 12%.
Portugal received a $112 billion loan package only two months ago. It
was due to sell 1 billion euros of treasury bills today but the
Portuguese government debt agency IGCP said it sold 848 million euros of
bills due in October.
Portugal is a reminder that Greece is just the tip of the iceberg and
Portugal, Ireland, Spain, Italy, Belgium, Hungary in Europe and the
U.S. itself face similar challenges, of greater and lesser degrees.
Cross Currency Rates
The risk of contagion in the Eurozone is increasing by the day which
poses obvious risks to the euro currency and the global financial and
Investors are increasingly concerned about the risk that contagion
poses to assets previously considered risk free such as U.S. Treasuries
and even German bunds. Germany may ultimately have to pay towards the
massive and growing costs of the deepening eurozone debt crisis.
PORTUGAL GOVT BS 10YR NOTE
Gold’s safe haven status will soon again be realized and universally
accepted and constant talk of a bubble will be seen as misguided.
This is assured as we live in an era where assets previously
considered risk free, such as U.S. treasuries and German bunds, are
increasingly being questioned.
If risk-free notes are no longer without risk, it will reverberate
throughout all markets (bonds, equities, currencies, gold etc) globally,
creating an increase in relative risk levels and a consequent
adjustment of investment values.
Paper assets and fiat currencies look set to continue to fall against
the finite and immutable currency that is gold. Especially as the risks
of a global currency war and global competitive currency devaluations
Continual short term panaceas by misguided policy makers doing the bidding of powerful banks has delayed the day of reckoning.
However, there is no such thing as a free lunch and the failure to
tackle the root cause of the problem, which is insolvency through too
much debt, means that the day of reckoning will be of orders of
magnitude greater had more rational policies been implemented.
Gold buying remains steady but surprisingly subdued given the scale
of the crisis. There remains a fundamental failure to comprehend the
scale of the crisis and a blind belief that the world will return to its
pre crisis state soon. This fails to appreciate that the pre crisis
state of the world, with massive and unprecedented levels of debt in the
U.S., the U.K. and most western economies was anything but normal.
CFTC GOLD NET LONGS
Animal spirits are low and very cautious as seen in CFTC data showing
that there has been a very significant liquidation by weak longs. The
scale of recent liquidation is indicative of a market low and suggests
we have made or are on the verge of reaching lows, basing and targeting
new record nominal highs in the coming period of seasonal strength.
Silver is trading at $35.69/oz,€24.86/oz and £22.28/oz.
PLATINUM GROUP METALS
Platinum is trading at $1,733.65/oz, palladium at $770/oz and rhodium at $1,925/oz.
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U.S. Government Debt and You