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Gold Over EUR 1,300 - On Way to ‘Infinity’ on Eurozone Contagion?

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From GoldCore

Gold Over EUR 1,300 - On Way to ‘Infinity’ on Eurozone Contagion?

Gold is trading at USD 1,783.10, EUR 1,307.50, GBP 1,116.30, CHF 1,612.20, JPY 138,315 and CNY 11,309 per ounce.

Gold’s London AM fix this morning was USD 1,780.00, GBP 1,112.50, and EUR 1,300.41 per ounce.

Yesterday's AM fix was USD 1,794.00, GBP 1,114.49, and EUR 1,301.51 per ounce.

Risk off has returned with a vengeance as Italian debt markets have gone into meltdown leading to falls in European equity indices. Gold remains near a seven week high and has risen to above EUR 1,305/oz due to the deepening Eurozone crisis and contagion risk.

Cross Currency Rates

Deepening geopolitical tensions regarding Iran, Israel and the western world has led to oil rising for six days in a row now and this is also supporting gold.  The International Atomic Energy Agency said Iran was developing nuclear-weapons capabilities that gave it "serious concern" about possible military aspects to Iran’s nuclear programme.

Italy’s bond markets are heading the way of Ireland, Greece and Portugal with their 10 year bond yield surging to over 7.45%  and the yield curve inverting with the 2 year yield rising above the 10 year.

China's gold consumption continues to surprise even bullish analysts. China's gold consumption is expected to jump nearly 50% to reach 400 tonnes this year. Thus exceeding the country's forecast of more than 350 tonnes. 400 tonnes compares to just 270 tonnes in 2010 which was itself a record month.

Official Chinese annual consumer inflation numbers showed an easing to 5.5% from September's 6.1%. The savings rate (1 year) is at 3.5% meaning steep negative real interest rates continue in China which is bullish for continuing Chinese gold demand.

 

So far, gold has not managed to rise above the psychologically important $1,800 level.  However, the real risk of contagion in the eurozone and the breakup of the European monetary union means that gold’s safe haven properties will be increasingly appreciated in the coming months.

While much of the media attention has been on the political ‘punch and judy’ show in Athens, Rome and in the European Union there continues to be a failure to soberly analyse the ramifications of the crisis for consumers, investors and savers.

The unprecedented scale of the debt crisis means that inflation and currency devaluations will almost certainly result from the crisis. Savers and those on fixed incomes will be very vulnerable as they were in the stagflation of the 1970’s and in the economic meltdowns seen in Argentina, Russia and in Belarus as we speak.

 

All the focus has shifted from Greece to Italy recently and markets and media have focused on the Eurozone debt crisis.

However, the US is itself facing a debt crisis which is also of a monumental scale. It is of a scale that it cannot be resolved by the usual kneejerk resorting to the printing presses and today’s equivalent panacea - computer credit creation.

The US National Debt will likely reach $15 trillion by the end of this week. Some estimates of unfunded liabilities are over $116 trillion. The US has similar issues to the many debt stricken countries of the Eurozone.

One of the few sane voices for many years regarding the dangers of excessive private and public debt has been Presidential candidate Ron Paul.

Gold Could Go to ‘Infinity’ Says Presidential Candidate Ron Paul

Ron Paul gave another perceptive interview to CNBC yesterday and warned of hyperinflation and the possibility that the dollar could become worthless. The CNBC interview can be watched here.

When asked how high the gold price would go and why, he responded:

well, the question is how much lower is the dollar going to go in purchasing power? and i said to infinity unless we change our ways. because if you look at the gold/dollar in 1913 when the fed started, we've lost about 98% of its value. so if we continue to do what we're doing, it could go to infinity. it's the best measurement of the value of the currency. there's no advantage to anybody to have a weak currency. the gold tells us that we have a weakening dollar and a weakening currency, but the whole world does, so it's hard to sort out. so it's going to go up a lot more, which is virtually saying the dollar has a long way to go down on purchasing power. that's why the middle class gets wiped out and that is why the standard of living is going. down for the people, they already know it, and that's why there's people very unhappy in this country and they'd like to blame a few people. for all of the problems rather than looking at the philosophy of government, the monetary system, and the spending. because that's where you can find the answers to our problems.”

We do not make price predictions but given the scale of the current global debt crisis it would be naïve to completely discount the possibility of sharp devaluations of the euro, the dollar and the pound and gold surging well above the inflation adjusted high of $2,500/oz in dollar and pound terms and equivalent prices in euros.

It is not too late to diversify and never has it been more important to be prudent.

For breaking news and commentary on financial markets and gold, follow us on Twitter

NEWS

(Reuters) -- Gold edges up, Italy's debt worries linger
http://www.reuters.com/article/2011/11/09/markets-precious-idUSL4E7M903Z...

(Financial Times) -- Gold pulls back from $1,800 level
http://www.ft.com/intl/cms/s/0/bdb3eca2-0a26-11e1-92b5-00144feabdc0.html

(Reuters) -- U.S. mulls Iran sanctions but not on oil, central bank
http://in.reuters.com/article/2011/11/09/idINIndia-60402020111109

(Business Week) -- Oil Increases a Sixth Day as Iran Nuclear Work Poses Supply Risk
http://www.businessweek.com/news/2011-11-09/oil-increases-a-sixth-day-as...

COMMENTARY

(CNBC Video) -- Jim Rickards, "Currency Wars" Author, Discusses Who Is the Biggest Currency Manipulation Offender
http://video.cnbc.com/gallery/?video=3000056081

(CNBC Video) -- Ron Paul on US Debt, Military Spending and Gold Going to 'Infinity'
http://video.cnbc.com/gallery/?video=3000056182

(FT Video) -- Could Gold Hit $2,500?
http://video.ft.com/v/1262968031001

(Max Keiser) -- Keiser Interviews Dr Constantine Gurdgiev - The Fed, The Treasury & The Holy Troika
http://maxkeiser.com/2011/11/08/kr207-keiser-report-the-fed-the-treasury...

(Mineweb) -- Gold's save haven properties re-emerging - Steel
http://www.mineweb.com/mineweb/view/mineweb/en/page96985?oid=139213&sn=2...

(Zero Hedge) -- Guest Post: The True Intrinsic Value of Euro 'Money'
http://www.zerohedge.com/news/guest-post-true-intrinsic-value-euro-money

 

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Wed, 11/09/2011 - 08:46 | 1860183 CPL
CPL's picture

Any bets on how fast they print another 3 trillion from nowhere?

 

Oh yeah...

 

Fuck paper,

Fuck TBills

Fuck Bonds

Fuck equities.

Fuck Facebook (got another request to buy common stock this morning at 9 a pop, down from 27 two weeks ago.)

 

Oil, Gold and silver are the only things on the market now with any value.

Wed, 11/09/2011 - 08:47 | 1860188 qussl3
qussl3's picture

Depends who bends over first i guess.

The Chinese dont seem too keen.

Wed, 11/09/2011 - 08:48 | 1860194 markmotive
markmotive's picture

Italian bond yields over 7%.

Probably time to brush up on how gold performs during a financial crisis...

http://seekingalpha.com/article/295567-how-gold-performs-during-a-financ...

 

Wed, 11/09/2011 - 08:59 | 1860232 qussl3
qussl3's picture

Before or after the liquidity crunch?

Paper or physical?

Not going to the moon anytime soon, unless we see some kind of paradigm shift (stupid term) in pension and fund manager attitudes AND mandates.

Hedgies who arent in already wont be.

Retail may still be coming on board.

But the big institutionals are not set up to ever buy gold - yet.

 

Wed, 11/09/2011 - 09:05 | 1860257 bernorange
bernorange's picture

Time is relative.  Who's on the train when it leaves the station is irrelevant.  To infinitiy, and beyond!

www.pmbug.com

Wed, 11/09/2011 - 10:50 | 1860688 Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

Actually time is very relevant except to immortals and Teh Bernak.  If you disagree, please send me your stash of gold and I'll repay it 1000x in 1000 years.

Wed, 11/09/2011 - 10:54 | 1860708 bernorange
bernorange's picture

relative <> relevant

"Soon" can mean different things depending upon your perspective.

Wed, 11/09/2011 - 09:29 | 1860350 Smiddywesson
Smiddywesson's picture

Not going to the moon anytime soon, unless we see some kind of paradigm shift (stupid term) in pension and fund manager attitudes AND mandates.  Hedgies who arent in already wont be.  Retail may still be coming on board.  But the big institutionals are not set up to ever buy gold - yet.

Yes, true, but the other side of the argument is:

  • If big institutionals can't play in the gold market, they are irrelevant to the price.  Prices are set at the margin.  People on the sidelines don't matter.
  • Kicking the can just increases the instability in the system.  The can kicking can end anytime, even from something as insignificant as an Archduke being assassinated in Serbia.  When the system crashes, gold and silver will be on everyone's lips, but it won't be for sale.
  • The smaller the market the easier it is to rise, the less money needed to move it.
  • Most importantly, a hundred years of price suppression in gold and the rapidly increasing debasement of the currency have already compressed the spring.  The "where's the liqidity" argument ignores that the price pressure already exists.  All that is holding gold and silver back from rising exponentially to their "true" prices is the hand of government.  TPTB will let go when central banks and their meaningful trading partners like China have enough gold to back a new monetary system not based on foreign currency reserves as an asset.     
Wed, 11/09/2011 - 09:40 | 1860380 qussl3
qussl3's picture

For the most part i agree.

Paper prices are set at the margin, hence in a liquidity crunch scenario, its likely the players would be forced to liquidate. Pity the fool which sells his physical then.

I think institutionals will eventually get in, but that would be the final phase, and when one should be looking to get out, and into whatever unburdened fiat/RE/Equities that will come then.

The CBs would avoid the open market whereever possible, which would likely reduce physical available to keep prices in check.

Suppression of prices now is i believe largely due to the financialization of PMs, liquidity has been going into the paper not the physical, as prices rise i expect this trend to accelerate.

Exponential comes when a well respected big boy cries "the emperor has no clothes" and the run on paper for physical ensues.

Not too sure thats soon tho.

 

Wed, 11/09/2011 - 11:52 | 1860945 Smiddywesson
Smiddywesson's picture

Agreed on all points, especially the final point.  The empereor has no clothes moment can happen anytime, today or a year or two from now.  My GUESS is no later than March of next year, but that's the beauty of holding physical metals, I can sit back and guess away.

Wed, 11/09/2011 - 10:00 | 1860500 mossme89
mossme89's picture

So if I wanted to buy gold & silver to hold as an inflation hege, which one should I buy? I immediately thought Gold, but Gold is mined and hoarded and Silver is mined and used, making it important as an industrial metal as well as a precious metal.

Wed, 11/09/2011 - 10:29 | 1860621 fiddler_on_the_roof
fiddler_on_the_roof's picture

Buy only Gold. Gold maples are only $45 over spot price at local dealers.
Gold has least flow to stock ratio of all precious metal and that they are
Owned by CBs

Wed, 11/09/2011 - 12:07 | 1861021 Smiddywesson
Smiddywesson's picture

Both are good plays and I hold both.  I concentrated in gold because central banks are stacking it and have it on the assest side of their balance sheet.  They are slowly removing foreign currencies from that list of assets, leaving gold as the backing of their paper.  In order for gold to fully back paper, it has to rise exponentially in price.  In order to restore the balance sheet of central banks that have bought up all the crappy MBSs and other underwater debt, they are going to have to ramp the price of gold.  They can't do that with silver, or with any other commodity for that matter, because driving prices exponentially for anything else would utterly destroy all the industries that rely upon that commodity.  For example, look what a 40% ramp in oil prices does to business.  Central banks will eventually have to let PMs seek their real price, and they will both ramp, but it's in central bank's self interest to reverse their practices and actively ramp gold prices.  This is not so with silver.

So why do I hold silver too? 

  • It is outrageously underpriced. 
  • It is in short supply. 
  • The same important people that are going to such great lengths to suppress gold prices are going to even greater lengths to punish silver investors. 
  • Gold is a store of wealth, but could be difficult to convert in a financial crisis because it is likely to be so expensive.  You might find it hard to change a $50,000 gold coin during a financial collapse, and you certainly don't want to be followed home after doing so.  Silver is more practical in this regard.
  • Silver is less expensive, so placing a few silver coins in your wallsafe, along with costume jewelry and some cheap foreign coins in sleeves to make them appear valuable, is a practical decoy to prevent any theives from unscrewing your wall safe to see what might be hidden behind in the wall.
  • Finally, silver is beautiful.  Gold is like a blond headed surfer girl, whereas silver is like a long, dark haired Victoria Secrets model.  Which is better?  I'll take both. 
Wed, 11/09/2011 - 08:47 | 1860189 ArkansasAngie
ArkansasAngie's picture

I'll not buy their bonds ... but I might buy their gold.  I'd want proof that's it's gold.

And ... I do want delivery.

 

Wed, 11/09/2011 - 09:07 | 1860262 sumo
sumo's picture

How smart is Venezuela looking now, for repatriating its gold?

Fuck you very much, BoE/LBMA. And a big cheerio to Gordon "bottom tick" Brown.

 

Wed, 11/09/2011 - 08:48 | 1860191 GeneMarchbanks
GeneMarchbanks's picture

If we close under 1780, it'll be a nice dip buying opportunity.

Wed, 11/09/2011 - 09:37 | 1860382 Pladizow
Pladizow's picture

So if it dips a fraction of a percent its a good buying opportunity?

You should be constantly buying, irresepective of price!

Wed, 11/09/2011 - 10:33 | 1860630 fiddler_on_the_roof
fiddler_on_the_roof's picture

+100. What he is talking is trader language. They work for pennies.
I had courage to buy thet recent dip at $1610.

Wed, 11/09/2011 - 08:48 | 1860195 Black Forest
Black Forest's picture

just piled up some physical

Wed, 11/09/2011 - 08:50 | 1860198 apberusdisvet
apberusdisvet's picture

 

In a non-manipulated market, gold would be up over $100 today, simply on the Euro implosion.  Now add inflation and the death of USTs and the Swissie, and $3000 SHOULD BE a lock

Wed, 11/09/2011 - 08:56 | 1860225 qussl3
qussl3's picture

A default would absolutely CRUSH liquidity.

Would make the 2008 margin call look like a picnic.

Paper would burn, physical would be impossible to find at paper spot.

 

Wed, 11/09/2011 - 09:00 | 1860237 CPL
CPL's picture

Yeah with the swiss backed by nothing but the smiles of the swiss, this crash is going to be so much more interesting.

 

There is now no avenue to stick handle and fuck around with silver and gold PM pricing via some ratty fiat currency.

 

Now gold and silver ARE the currencies.  Either TPTB made one ingenius play that will reveal itself in a couple more steps.  Or it's one of the dumbest moves out of the financial community ever performed.  Either way I'm glad most of them were too stupid to get into the sciences, could you imagine the stuff these weiners would engineer.

 

"Okay, now if we build the roof first that should allow the basement to be done last.  After we're done that the closet that contains oily rags, gas and flint is going in."

Wed, 11/09/2011 - 09:13 | 1860283 qussl3
qussl3's picture

Only thing they can pull is kill the convertibility of the PMs.

Keep fucking with the leverage, induce insane volatility and raise the barriers to deliever and physical purchase.

Confiscation wont work in today's global village, they have to destroy its credibility instead.

Good luck with that lol.

Wed, 11/09/2011 - 09:27 | 1860333 CPL
CPL's picture

Exactly.  A physical asset is the mortal enemy of pie in the sky ivory tower fiscal preachers.

 

And it'll be hard to ruin 6000 years of usage for either gold and silver.  At least of written history.  Gold is a strange cat, all empires have used it.

Wed, 11/09/2011 - 09:55 | 1860472 LawsofPhysics
LawsofPhysics's picture

Correct.  And that is ANY physical asset.  Whether it be gold to buy food and security or food and security to exchange for gold.

Wed, 11/09/2011 - 10:21 | 1860583 whaletail
whaletail's picture

"Whether it be gold to buy food and security or food and security to exchange for gold."

So it is money! Beautiful thing when an idea takes hold.

Wed, 11/09/2011 - 09:02 | 1860234 lunaticfringe
lunaticfringe's picture

The only candidate, save Gary Johnson, worth a shit. Run as an independent? I hope so. Any man worth two shits ought not to dip a toe in the existing two party, singular gene pool. I liked the Paul piece.

Wed, 11/09/2011 - 09:14 | 1860287 Bazooka
Bazooka's picture

GLD will not exceed $1800....it will fall with the equities, not only ETFs GLD and SLV but actual physical gold prices will fall. These have been and will move tandemly with equities as it has since 2007.

When deep margin calls are increased (today's LCH is nothing compared to the margin calls that will come), holders of gold will also be holders of sovereign debt, bank bonds, etc....and to meet these margin calls, they will unload....Gold and Silver.

Wed, 11/09/2011 - 09:30 | 1860352 Comay Mierda
Comay Mierda's picture

anyone who is smart enough to hold physical gold /silver doesnt hold all that other bullshit. paper prices of gold and silver will collapse (along with the US Dollar) to keep the euro ponzi afloat. watch the physical prices soar

Wed, 11/09/2011 - 09:46 | 1860432 CPL
CPL's picture

If you haven't figured it out there is nothing on paper that can change the main street value of gold.  I don't know if you've actually bought any PM's but when I see 1800, throw another $100 on that price.

 

The ETF/ETN universe is built of dragons breath and unicorn kisses, there isn't anything behind them and everyone has learned that objective lesson over the last three years. 

 

My favorite thing is watching people attempt to fuck around with numbers to hammer the square peg of ETF/ETN valuation through the round hole of price reality.  Never works obviously.  But it certainly makes me laugh.

 

BTW there is no margin on gold and silver anymore, well, it's so low that what you see is almost what you get.  Seriously go to kitco and try to buy an ounce of gold for 1800, you'll be short a couple of bucks.  But by all means keep chasing the leveraged decay on the ETF's and ETN's, I'll just watch another chump get handed a big bag of nothing chasing ETF/ETN offerings.

Wed, 11/09/2011 - 10:04 | 1860439 Smiddywesson
Smiddywesson's picture

Well, if this were 2007, you'd no doubt be right.  However, this isn't 2007.  We have debased the currency quite a bit since then, and the inescapable nature of depression is now clear, especially in Europe and China, as well as the obvious intention of all countries to print us into oblivion. 

We are too far into the process of complete fiat destruction for your scenario to continue to be correct.  We came perilously close to a decoupling when gold ran down to $1534.  Vendors shuttered their windows and their web sites went down.  There's a reason it rose right back up above $1600 you know.  It sure as shit wasn't supply and demand because the demand was there already.  It rose back above $1600 because TPTB realized they nearly screwed the pooch and decoupled paper from physical, so they let it rise. 

Sure, margin calls will continue to push down prices, but we are seeing rapidly diminishing returns on price suppression.  Physical holders will not sell, and vendors of PMs are going to be increasingly unwilling to meet demand during these predictable events.  That makes decoupling an ever increasing risk, and decoupling spells the end of kick the can.

The manipulators of PM prices know they are losing this battle.  They can't even do what they did last August because the process is getting too fragile.   

Wed, 11/09/2011 - 09:16 | 1860298 Comay Mierda
Comay Mierda's picture

Ron Paul makes too much sense to get elected. The american sheeple want a "Snooki in a Suit" to run things

Wed, 11/09/2011 - 09:33 | 1860367 Georgesblog
Georgesblog's picture


    As Firesign Theatre pointed out, you can’t get to the Old Same Place, from here. So it is for the  global paper markets. The sales pitch on the Grand Ponzi Scheme doesn’t work, anymore. 

http://georgesblogforum.wordpress.com/2011/10/13/fiat-addiction-update-10132011/

Wed, 11/09/2011 - 09:36 | 1860375 boyplunger
boyplunger's picture

Ron becomes president, money printing over, what happens to gold?

Wed, 11/09/2011 - 09:40 | 1860402 Pladizow
Pladizow's picture

Monetized and rockets!

Wed, 11/09/2011 - 11:04 | 1860744 RiverRoad
RiverRoad's picture

It backs our dollar.

Wed, 11/09/2011 - 09:42 | 1860415 larry david
larry david's picture

Gold will go to the moon but will you ever be legally allowed to cash in on it when it goes over $5k?  Probably not.  Black markets will do their thing, but I suspect if things get crazy enough, owning gold would become a felony.  Undercover agents running around trying to entrap people into trading their gold?  Who knows...these fuckers are nothing more than pieces of shit but they are addicted to power and the only way to keep their power is to completely destroy gold, either in price or by just making it so risky to trade that people may just bury it out back and forget about it until things blow over. 

Wed, 11/09/2011 - 09:55 | 1860479 Pladizow
Pladizow's picture

And if I want to sell my gold chain?

Wed, 11/09/2011 - 10:46 | 1860675 awkward squad
awkward squad's picture

How will you flush if you do that?

Wed, 11/09/2011 - 10:34 | 1860635 Clay Hill
Clay Hill's picture

Smells like fear.

 

Long Black Markets.

Wed, 11/09/2011 - 10:11 | 1860536 Flakmeister
Flakmeister's picture

RP is a lovable cranky old man.... but the dollar ain't collapsing as long as oil is priced in dollars....

When you start to hear that international tanker deliverable oil is being priced in quatloos or some such, the game is at the 2 minute warning...

Wed, 11/09/2011 - 10:43 | 1860665 mayhem_korner
mayhem_korner's picture

 

 

Methinks the latest gold correction is passe.  What's the under/over on how many smackdowns are left before we have paper/physical separation? 

I think it's 2, and both before Q3 2012...

Wed, 11/09/2011 - 11:03 | 1860739 RiverRoad
RiverRoad's picture

Gold is the glue holding the world together at this moment, thank god.  Without gold we'd have to use pretzels.

Wed, 11/09/2011 - 11:23 | 1860812 digalert
digalert's picture

Here come the judge

Judge Andrew Napolitano:

One thing governments can't control, ever, would be the black market. Prohibition ring a bell? How's that war on drugs been working out? Drug business is so lucrative that banks - JPM drug money laundering - and US government have joined in the trade. The US is only fighting their drug cartel competition now. Sure they can make gold possession illegal...got some hooch?

Wed, 11/09/2011 - 11:38 | 1860889 Clay Hill
Clay Hill's picture

What's really funny is that the longer we move through a slow motion collapse, the worse .gov makes it on themselves.

 

Now that Main Street "99'ers" have been struggling to keep their heads above water in a "garage sale" economy for a couple of years, there are screaming deals to be found if you know "all the wrong people".

Wed, 11/09/2011 - 11:35 | 1860869 Anne Ominous
Anne Ominous's picture

BOOM... Bitchez!

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