Gold And Silver Higher As ECB Intervenes In Markets – Currency And Euro Debasement Accelerates

Tyler Durden's picture

From Gold Core

Gold and Silver Higher As ECB Intervenes in Markets – Currency and Euro Debasement Accelerates

Gold in USD terms is 2.5% higher after the weekend U.S. downgrade and is higher against all currencies and trading at USD 1,706.40 , EUR 1,195.90 , GBP 1,039.20, CHF 1,039.20 per ounce and 132,549.00 JPY.  Gold’s London AM fix was USD 1,709.75, EUR 1195.21, GBP 1,040.94.

Cross Currency Rates

There has been massive intervention by the ECB in the Spanish and Italian bond markets. 10 year yields have plummeted by more than 12% from above 6% to 5.27% and 5.34% respectively.

Other peripheral bond markets have fallen but Portuguese and Irish yields are only slightly lower. 5 year CDS have also fallen sharply for Spanish and Italian debt but falls in other markets were slighter and the cost to ensure French debt increased by 7 basis points.

There is increasing talk of a French downgrade and some are wondering why the UK has not been downgraded.

Gold is up 2.6% in euro terms to nearly EUR 1,200/oz which is not a ringing endorsement of the ECB’s intervention.

Non debase-able silver has surged nearly 4% and is back just below $40/oz.

European Bond Market Monitor

It is quite possible that there was also intervention in equity markets as well as European indices fell sharply on the open prior to sharp reversals and going positive early morning.  If there was intervention (by Working Group on Financial Markets or the ‘Plunge Protection Team’) in equity markets they were futile as equities have resumed their downward trend.

The FTSE, DAX and CAC are down 1.9%, 2.9% and 2.5% respectively and US futures are showing 2% to 3% losses.

Is this intervention another short term panacea in a long line of short term panaceas?

It certainly looks like it. Piling more debt on top of already humungous debt levels will prolong and likely deepen the global debt crisis.

It makes contagion more likely as the balance sheet of the ECB is now being infected by the peripheral European countries.

The electronic creation of hundreds of billions of euros to bail out bankrupt countries is currency debasement which has a long history of not working out to well.

What is needed is debt forgiveness and debt restructuring and a gradual deleveraging and downsizing of the balance sheets in the banking sector and financial system. Taxpayers should not be further burdened. This is unjust and will inevitably prolong and delay a recovery.

Those with little or no knowledge of financial, economic and most importantly monetary history continue to warn that gold is or may be a bubble. They should be urging diversification but alas do not understand diversification or gold.

They focus exclusively on the nominal dollar price and fail to consider the price in euros and other fiat currencies.

They do not adjust for the significant inflation of the last 31 years. Gold’s real record high in 1980 was $2,400/oz.

They do not compare gold’s price performance in last 10 years with that of its last bull market in 1970’s.

Considering gold purely in terms of price is misguided anyway as what is more important is gold’s value.

Gold’s value is as a safe haven asset that cannot go bankrupt, as financial insurance and as a store of value.

Many today know the price of everything and the value of nothing. This is especially the case with gold.


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Thorlyx's picture

Gold and Silver, Bitchez...

Reptil's picture

1600 EUR/ 2400 USD/ounce sounds about right in the coming month. (if the house of cards holds together at all)

Silver has yet to make it's corrective move. a ratio of 30 to 1 is not ridiculous IMHO.

malikai's picture

Just curious, why would the UK be downgraded? As I understand it, the UK's voluntary plunge into austerity was supposed to avoid all that business.

EscapeKey's picture

The official debt/GDP figure in the UK is 76.5% - but this does not cover the roughly 110% of GDP's worth of "illiquid assets" which the BoE "temporarily" took over in the wake of 2008.

The fact that these assets remain "illiquid" is obviously because the market is still weak, and certainly not because the UK eventually will be forced to take a substantial haircut, plunging the official debt/GDP ratio above 100% - ie Italy territory, with a MUCH worse deficit to boot.

Anyhoo, the BoE openly discuss another round of QE. Considering the BoE at present own about 33% of all outstanding gilts, I guess they won't be satisfied until they truly own the country (and the Pound Sterling is worthless).

Not to forget: British "austerity" means future spending will rise at a lower rate. How the fuck that's austerity is anyone's guess.

Smiddywesson's picture

In a global economy, all countries are chained together and wearing anchors of various weights around their ankles.  If the weaker ones go over the rail, they will drag everyone else into the water.  The UK is going to the bottom of the sea along with all the major economies, including China, only China will never admit it after the fact

Snidley Whipsnae's picture

And to add to the Brits woes... depletion of their oil fields is ongoing; ie, another revenue stream is drying up...

Quintus's picture

On Wednesday, we are expecting GDP numbers that are far weaker than forecast to be announced.  The UK's recovery plan was always predicated on heroic assumptions about growth that had no chance at all of materialising.

Lower growth = lower Government revenue + higher government spending = higher borrowing = downgrade.  

Thorlyx's picture

and the "growth" will come from manufacturing and exporting items of high practical value like in the last 30 years ????

EscapeKey's picture

Well, we're actually quite fucked here in the UK, because our main export markets are the very same economies which currently struggle.

Long-John-Silver's picture

The UK's debt slaves are rioting and burning the outskirts of London.

If the UK does not acquiesce to the demand for Bread and Circus by

their debt slaves London will burn. If they do acquiesce London will

crumble under massive debt. It's become a lose lose situation.


JJ McApe's picture

if bernanke announces QE3 gold/silver goes apeshit :D

chump666's picture

france 5yr cds up 7%, haha the ecb has lost the plot

anony's picture

OK.  I'm going to buy 10 ounces of gold at the market today.

I would, if I were you, sell it to me.  WHY? Because every bet I have made on gold, short or long for the last 3 years  has been 100% upside down. I have lost money on the metal, the futures, the miners, and the ETF triples, no matter which one I choose. If I stay at this long enough, I will be living in a box under the London Bridge.

If you feel like sharing your for-sure gains over the next couple of days, that would help me make another bet that will go upside down as soon as I execute and if you take the other side of that gamble you are certain to win.

You could get berry berry rich doing this.  Again, if you care to share your profits with me for giving you the kind of solid Inside Information that is completely legal, I wouldn't turn it down.  If you keep me in the game and bet against me, you too can be like George Soros.

Smiddywesson's picture

Buy physical, stop watching the price.

If paper goes to zero, price is irrelevant.

Contrary to common belief, these people are not stupid.  Everything the banksters and government officials have done has been to keep the banks alive.  A new gold type standard will make the central banks and soverign nations whole, but screw anyone with paper.  If you believe TPTB can repair their balance sheets, restore sanity to their spending habits, and save the banks, then keep trading paper.  But if you believe its a choice between the survival of the current fiat or the survival of the banks, and that choice has been made in favor of the banks, then start staking PMs.

4realmoney's picture

Looks like I picked the wrong week to start buying Krugerrands.

John McCloy's picture

The Iowa GOP debate is 8/11. After the entire world and nation have been made aware of how serious this situation with our credit downgrade we are going to have record numbers of people watching this debate out of curiousity and the moment one of these moderators attempts to ask another candidate if they believe the Tea Party is the cause for this downgrade the question is going to flip to Ron Paul and he is going to eat their fucking lunch while pointing out why Gold is 1700 an ounce. 

    Maybe then some of those on the fence will be able to connect the dots between the Fed and our economy and the wars that not only never end but expand.

Smiddywesson's picture

That would be nice.  Thanks for a little ray of hope. 

I think the public is about to get the picture anyway, but most will get screwed. 

baby_BLYTHE's picture

Ron Paul to the others: "I told you fuckkers so!"

DaBernank's picture

Greenshoots!!! (as in shooting green €100 notes)

GoldBricker's picture

Yes, maximum note size is still $100 in the US, supposedly to make large cash transactions more awkward. (Here in Europe the largest note is 500 euro, about $700.)

When the US is finally forced to introduce larger notes due to inflation, then you'll know that the lid has really come off.

Mesquite's picture

As I remember, they had/have 10,000 US$ notes (for a long time)..

Dismal Scientist's picture

Tomorrow pre market open we will know Chinese CPI and Industrial Production numbers for July. Don't kid yourself, this market has one shred of hope left, namely that the Chinese can continue to grow without excessive inflation. If either, let alone both, of those numbers disappoint versus expectation, then all bets are off very quickly indeed.

At that point it really is duck and cover time. Which I guess lots of people here would welcome. I am curious how they will really feel about it if and when it happens...

Smiddywesson's picture

Those Chinese numbers are bogus.  Their growth is almost entirely due to government spending on empty cities and high speed rails.  The wages in the big coastal cities are no longer as competitive as they were.  Most importantly, global trade is about to take a big steaming dump as trade barriers go up.  The model that built China is unsustainable because the entire global economic model is unsustainable.  It was a Ponzi scheme to screw the middle class in the West to the benefit of the big multi-national corporations.  Those corporations are struggling now to hold their grip on political systems, economic systems, and trade, but a hungry population in each country has reached the breaking point.

You can hold onto hope that China will continue to grow, and what, dig out the economies of the world?  Without customers?  In a global depression?  Was a healthy China a growth engine for the West?  Why will an unhealthy China be good for the West?  That is a pipe dream.

Dismal Scientist's picture

Sure, all govt economic statistics are bogus. If you read what I said, not what you think I said, then you'll find I was talking about whatever the bogus numbers are versus expectations. Thats what will drive markets in the short term, which was the observation I was making.

Internet Tough Guy's picture

Oh noez, the ECB is taking debt on its balance sheet! Has anyone noticed that gold has soared? Where does gold appear on the ECB consolidated financial statement? Oh yes, line one. And the price floats. Looks like an asset of increasing value.

Now where is the price of gold on the Fed balance sheet? Hmmmm.....that's odd.

Now who wins and who loses?

KingdomKum's picture

We few, we happy few, we band of silver holders  .  .  .  !

sudzee's picture

When gov'ts and CB's try to cover their gold shorts the fun will begin. Non-existant gold reserves levered to the moon are not a good thing to be sitting on. Then again, a buy back with free printed digital fiat, should finally price a physical ounce to the real market price.

Internet Tough Guy's picture

No one is covering anything. Cash settlement.

Smiddywesson's picture

They have had 3 years to replace the gold in Ft. Knox, I would imagine they have used the time wisely.  As for leverage, the government doesn't care about paper or counterparty risk, they can just default on any paper and the gold is all theirs.

RiverRoad's picture

Forgive us our debts as we forgive our debtors.......THEN get back to business.

falak pema's picture

Well, Trichet and ECB have played their part massively today. But the announcement that the emergency sovereign fund ceiling, underwritten by Germany/France, will NOT be raised, due to Germany's current veto, has chilled the sentiment. As Trichet has his ass exposed if the government sovereign fund does not follow up. The ECB will have to back pedal if this grid lock persists, as Sarkozy had promised them this week end (to Trichet), Germany's veto would not occur; it has now occured. Merkel is now getting cold feet.

Ding, dong, ding dong the pendulum swings...

BTW :If Timmah says EU needs bigger bail out fund then the opposite has to be true! Hamburger university default oblige; aka WB7's post.

thunderchief's picture

I'm not happy at 40 silver.  It should be trading at sixty in this environment.  As usual last weeks three dollar drive by shooting had its effect.  FU JP Morgan.

falak pema's picture

you should write to Ben and say so.

OliverTwist's picture

and it is coming down ... surreal

falak pema's picture

speedy : how many times a minute does your avatar do her stuff? I can't look and count at the same time, like GF of old.

chinawholesaler's picture

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