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Gold Near Record USD And EUR High – Eurozone Debt And U.S. Default Risks Global Financial Contagion

Tyler Durden's picture




 


From Gold Core

Gold Near Record USD and EUR High – Eurozone Debt and U.S. Default Risks Global Financial Contagion

Gold is marginally higher against most currencies today and is trading at USD 1,614.40, EUR 1,130.50, GBP 990.08 and CHF 1,294.50 per ounce. Gold is flat against the dollar but remains just less than 1% from the record nominal high reached yesterday ($1,628.05/oz).  The euro is under pressure again today and gold is 0.7% higher against the euro and is just less than 1.5% away from the record euro high of EUR 1,144.80/oz reached last Monday.

Cross Currency Rates

Early gains in Europe saw gold fix at USD 1617.50/oz in London prior to a bout of selling saw gold fall and then rise again. Volatility has increased but remains low compared to levels seen in the late 1970’s.

European indices followed Asian indices lower (Nikkei -1.45%, Sensex -1.03%, Shanghai -1.01%, Hang Seng +0.3%, STI -0.49%) and the FTSE is down 0.73%. The Italian MIB is down 1.2% and the DAX 1.66%. 


Investors were made nervous by comments from chemicals major BASF, which said it saw global economic growth slowing as it posted weaker-than-expected earnings, sending its stock down 4.9%.

Siemens AG, Europe's largest engineering conglomerate, warned that global economic risks were increasing and posted below forecast results. Its shares fell 1.3%.

As per yesterday, Spanish and particularly Italian bonds are under pressure today with the Spanish 10 year rising to 6.06% and the Italian 10 year rising to 5.94%.

One-year CDS (credit default swap) prices on U.S. debt have moved above five-year CDS prices, signaling that the risk of financial contagion remains real.

Europe's STOXX bank index has lost about 25 percent since mid-February suggesting jitters regarding the possibility of a second phase to the banking crisis.

The Dow to Gold Ratio has again turned down suggesting gold may continue to outperform U.S. stocks and the DJIA, in particular, in the coming weeks. The long term target of below 2:1 remains viable.

Dow-to-Gold Ratio: Financial Assets vs. Hard Assets

Separately, JP Morgan (JPM) have  forecast gold to rise to $1,800/oz by year end on continued strong retail and official demand. and lower scrap supply.

For the latest news, commentary, infographics and videos on gold and financial markets follow us on Twitter

NEWS

(Bloomberg) -- Gold Trades Near All-Time High as U.S. Lawmakers Strive to Avert Default
http://www.bloomberg.com/news/2011-07-28/gold-trades-near-all-time-high-as-u-s-lawmakers-strive-to-avert-default.html

(Reuters) -- Gold pauses after hitting records; U.S. debt in focus
http://www.reuters.com/article/2011/07/28/us-markets-precious-idUSTRE7592IU20110728

(The Telegraph) -- Dominique Strauss-Kahn: phone recordings 'prove' maid is not a gold-digger
http://www.telegraph.co.uk/finance/dominique-strauss-kahn/8667063/Dominique-Strauss-Kahn-phone-recordings-prove-maid-is-not-a-gold-digger.html

(The Sun) -- Gordon Brown's Bullion bungle that cost us £600 each
http://www.thesun.co.uk/sol/homepage/features/3719271/Gordon-Browns-gold-bullion-bungle-cost-us-600-each.html

COMMENTARY

(The Telegraph) -- Flee to Mars if America commits worst error since 1931
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011129/flee-to-mars-if-america-commits-worst-error-since-1931/

(Got Gold Report) -- Gene Arensberg: Charts mark path to new era of hard-money currency
http://www.gotgoldreport.com/2011/07/chart-book-july-27-for-usd-gold-and-silver-.html

(GoldSeek) -- Gold Report and John Williams: Debt Limit Debate Sign of Deeper Dysfunction
http://news.goldseek.com/GoldSeek/1311797022.php

(ZeroHedge) -- A Thousand Pictures Is Worth One Word: Worthless
http://www.zerohedge.com/news/thousand-pictures-worth-one-word-worthless

(Wall Street Journal) -- Rosenberg: Debt Impasse Helping Treasurys <and Gold> (Possible
Economic Chaos Ahead)
http://blogs.wsj.com/marketbeat/2011/07/27/rosenberg-debt-impasse-helping-treasurys-possible-economic-chaos-ahead/

(Casey Research) -- Gold Noise Growing Louder
http://www.caseyresearch.com/cdd

(Washington Times) -- Is the bubble gold or is gold in a bubble?
http://communities.washingtontimes.com/neighborhood/vasko-kohlmayers-globe/2011/jul/28/bubble-gold-or-gold-bubble/

 

 

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Thu, 07/28/2011 - 07:48 | 1500584 TSA Thug
TSA Thug's picture

Equities commentary brought to you by TSA Thug.

We are a little oversold in the short-term so chances are we may see a rebound as early as today.

Intermediate-term doesn’t look good, or more precisely, rebound, if any, is sell. Although the primary sell signal of Non-Stop is not sell yet but the other 3 major signals, NYSI, BPSPX and BPNDX, are all on the sell side now which usually means unpleasant ahead. For example, the recent 2 times those 3 signals happened before the primary sell signal was on 01/25/2010 and 05/03/2010, especially the 05/03/2010 case, I hope you still remember the 05/06 crash, don’t you?

--You WILL Obey!
http://www.youtube.com/watch?v=dTOcAt44_QA

Thu, 07/28/2011 - 07:50 | 1500590 Theta_Burn
Theta_Burn's picture

Anyone else find it incredable US market hasn't tanked at least 1-2K yet?

I'm postiioning for the GUARANTEED 100-300 upward spike when these douchbags pass....anything

Thu, 07/28/2011 - 09:30 | 1500748 Smiddywesson
Smiddywesson's picture

It has tanked, but the PPT keep placing the trampoline under it.  I like TSAThug"s reversal indicators, but the trampoline is more in use now than it was in the crash in 07', therefore, the indicator readings won't work as well. 

What if it doesn't crash?  The stock market ramped as the currency was destroyed in Weimar Germany.  If the last two years has taught us anything, it is probable that TPTB will continue to hold up the market as they destroy the dollar, innocently claiming there is no inflation while stripping everyone of their savings.  Remember "This Administration's policy is to support a strong dollar"???  That bold face lie pales in comparison to the "there is no inflation" due to monetary policy lies.  They made the same clains in Germany.

Indicators don't work in times like these, history works.

Thu, 07/28/2011 - 09:32 | 1500750 Smiddywesson
Smiddywesson's picture

Duplicate (I swear I am not drinking, yet)

 

Thu, 07/28/2011 - 07:59 | 1500599 GetZeeGold
GetZeeGold's picture

 

I swear I saw this headline yesterday.....I feel like I'm in a time warp.

 

Thu, 07/28/2011 - 08:04 | 1500603 Cash_is_Trash
Cash_is_Trash's picture

You've been hoarding FRN's in the mattress, haven't you? ;-)

Thu, 07/28/2011 - 08:23 | 1500625 bigdumbnugly
bigdumbnugly's picture

say...... i was just wondering -

do you happen to recall the lotto numbers too?

 

 

Thu, 07/28/2011 - 08:12 | 1500611 Tao 4 the Show
Tao 4 the Show's picture

Gold action described above is all about currency weakness. When the gold price start breaking out in terms of Swiss Francs, it will be more interesting. Strength above 1300 is a bit interesting, above 1350 more interesting, and above 1400 very interesting.

Thu, 07/28/2011 - 08:40 | 1500645 Temporalist
Temporalist's picture

The Swissie can't handle the onslaught of interested buyers into a strong currency and if they decide to weaken their currency revaluation to gold will happen quite quickly.

Thu, 07/28/2011 - 09:42 | 1500813 Smiddywesson
Smiddywesson's picture

Temporalist,  I agree 100% that there is too much paper in the world looking for a safehaven for any currency to survive this crisis.  All the life rafts are chained together because if one currency seems to be a safehaven, all the people who want to be survivors will swarm into that currency and sink it.

Thu, 07/28/2011 - 08:17 | 1500620 Stoploss
Stoploss's picture

I don't see kingworldnews.com in the reader column Tyler, is it a preference thing? Seems to have some familiar faces.

Thu, 07/28/2011 - 08:20 | 1500621 baby_BLYTHE
baby_BLYTHE's picture

As I expected, Robotraitor's target of DOW 13500K and Gold $1650 will be wrong.

Gold will get there much sooner. The DOW will still be well below 13k. 

Thu, 07/28/2011 - 09:48 | 1500843 Smiddywesson
Smiddywesson's picture

I said that last year, but I was wrong. 

Whatever the mechanism employed to hold up this empty hust of a market, I think the whole system has to crash before they stop employing it. 

Therefore, I think the Dow is likely to be still trading in a tight range at year's end, but gold will have risen greatly in price.  (Diminishing returns in suppressing prices). 

 

Thu, 07/28/2011 - 08:41 | 1500649 Spitzer
Spitzer's picture

I doubled my gold holdings yeasterday but I was buying with Canadian dolllars. It was options exp, summer season and the CAD was at 3 year highs so why not.

Bank of Nova Scotia Toronto was out of 10 oz bars, BNS Edmonton was out of 5 oz bars.

Thu, 07/28/2011 - 08:57 | 1500671 Long-John-Silver
Long-John-Silver's picture

I find it extremely interesting that prices of American $50 Gold Eagles versus Paper US Dollars over the last 4 years mirror the rise of the Gold Mark versus the Paper Mark from 1918 to about this same time in 1922.

American Gold Eagle price chart.

http://www.monex.com/images/charts/AE_LINE_1825DAY_BIG.PNG

Gold Mark versus Paper Mark chart.

http://upload.wikimedia.org/wikipedia/commons/8/8f/GermanyHyperChart.jpg

Thu, 07/28/2011 - 10:11 | 1500921 Smiddywesson
Smiddywesson's picture

A great book about that is "When Money Dies."  Even the statements of the bankers and politicians from that time mirror the lies of ours today.

The similarity of the charts tells me someone has been studying how to boil a frog slowly, and unfortunately, we are the frog.

Your chart indicates that if the similarities hold true, we should experience parabolic prices in gold and silver in 2013.  Inasmuch as it took 98 years for the Fed to devalue the dollar by 98%, I like the math. 

However, there is also a case to be made that the amount of derivatives out there, the complexity of international finance, and the globalization of our economies could accelerate the destruction of the system.  I'm not sure we can make it to 2013 before the wheels come flying off.

The death of one fiat currency is very different than the death of all fiat currencies.  The current system requires cooperation of all central banks in order to kick the can down the road and slowly acquire gold.  Howver, as the crisis progresses, these participants are under increasing pressure and self interest to stab each other in the back and grab what they can.  We may see parabolic prices in gold in the beginning of 2013, or as early as mid 2012. 

Another argument could be made that the drawn out nature of this crisis has allowed TPTB to desensitize the market participants to their danger, so that they will be able to drag this out for a long, long time.  I would counter that things are too complex today for TPTB to keep the juggling act going, and that their skills are over rated.  They clearly thought they could stimulate their way out of this with QE1 and QE2, otherwise the central banks of the world would have started acquiring gold en mass much earlier than 2010.  That was their "oops" moment, when they shifted from bailing out the boat to grabbing all the life vests and the sole life raft for themselves and their cronies.  They are not as smart as they think they are.  They are powerful yes, but they are not wise.

Thu, 07/28/2011 - 13:10 | 1501534 Monedas
Monedas's picture

"When Democracy Dies !"....Monedas 2011 Every democracy that is has been hijacked by the left ! The hijackings were financed with their own funny money ! The left will never share power ! Anders figured that out ! We are slaves on the liberal plantation and our only way out is civil war, revolution, slave uprisings, civil disobedience etc. ! A slave has a right to fight for his freedom ! Gold and Guns ! We have to rush the hijackers ! "Let's roll !" ?

Thu, 07/28/2011 - 13:43 | 1501632 Grand Supercycle
Grand Supercycle's picture

I still expect PM's to follow equities (down)

http://stockmarket618.wordpress.com

Thu, 07/28/2011 - 18:43 | 1502596 Smiddywesson
Smiddywesson's picture

Maybe so, but the eventual destination isn't just one of deflation, it is currency destruction and starvation.  Gold will be worth something, treasuries and paper will be worth nothing.

In my dark world gold and silver will be outperformed by food and lead, lots of hot lead.

Thu, 07/28/2011 - 19:01 | 1502644 Smiddywesson
Smiddywesson's picture

I agree there are a whole lot of tears coming for those trying to make a buck in these markets, but charts are not very revealing about where the markets are going because of the massive manipulation by the government and the Fed.  We all know it is coming, but charts are useless against Ben Bernanke's ability to manipulate.

Thu, 07/28/2011 - 21:11 | 1502940 tom a taxpayer
tom a taxpayer's picture

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