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Gold Surges In Asian Trading To Record Nominal High On Washington Theatre And Dollar Debasement

Tyler Durden's picture




 

From GoldCore

Gold Surges in Asian Trading to Record Nominal High on Washington Theatre and Dollar Debasement

Gold surged 1.4% ($23) from $1,600.90/oz to a new record nominal of $1,624.07/oz within an hour of the open in Asia. Gold reached new highs due to continuing uncertainty  and theatre regarding the debt ceiling negotiations in Washington. Gold is higher in all currencies except the Swiss franc as the Swiss currency is also continuing to see flows.

Silver surged 2% on the open from $39.69/oz to $40.48/oz and is higher in all currencies including the Swissie. There was some unusual selling in the electronic market prior to the open which saw prices fall from the close on Friday at $40.05/oz to $39.69/oz prior to the surge on the open.


Cross Currency Rates

Asian indices fell with the Chinese indices in particular down sharply (CSI 300 -3.25%) on the U.S. debt impasse concerns.

The high speed train crash may have contributed to the larger losses in China but there are also growing concerns about the Chinese financial system and economy.

European indices have recovered from an initial sell off and peripheral Eurozone debt markets have seen some selling.

The tragic events in Norway may also have markets on edge and police around Europe are on increased alert regarding security threats. Geopolitical risk remains an important reason for maintaining allocations to precious metals.

US Dollar Index – 1971-Today (Weekly)

Markets are spooked by the political theatre which continued in Washington over the weekend.

An eleventh-hour solution is expected before next Tuesday’s August 2 deadline when the U.S. Treasury has said that it would not be able to borrow any more funds.

At the same time, investors have cut their exposure to risky assets and the appalling fiscal situation in the U.S. is positive for gold and silver – whether the politicians come to an agreement or not.

The dollar and US treasuries look set to come under pressure in the coming weeks – especially treasuries which remains close to record historical highs (record low yields) after a historic 30 year bull run.

US Generic Govt 30 Year Yield – 1977 to Today (Weekly)

Political posturing and alarmist rhetoric about ‘catastrophe’ and ‘Armageddon’ has been used by many, including President Obama and Treasury Secretary Geitner, but a default is quite unlikely as ratings agencies may be unlikely to downgrade the U.S. with the global financial system already in such a precarious state.

Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury’s debt and Uncle Sam can continue to print an endless stream of money in order to redeem its bonds.

Also, in a worst case scenario, President Obama has the power to ignore the debt ceiling limit and could declare a national emergency due to the threat of “financial Armageddon’, thereby making redundant the divided Congress.

The debt ceiling will almost certainly be increased by next Tuesday which is bullish for gold and silver in the long term as it means that the dollar will continue to be printed en masse and the embattled world reserve currency will continue to be debased.

Throughout history, inflation, currency devaluation and currency debasement have never ended well.

Indeed, without exception currency debasement has ended in economic hardship for ordinary citizens.

World’s Top 15 Largest Gold Producers by 2010 Output and ‘Peak Gold’

Bloomberg published last week a table of the world’s largest gold producers, ranked by 2010 production and based on data from London-based researcher GFMS Ltd (all figures are in metric tons).

Rank      Company                  2010      2009

  1. Barrick Gold Corp.       241.5     230.1
  2. Newmont Mining Corp.     167.7     162.9
  3. AngloGold Ashanti Ltd    140.4     143.0
  4. Gold Fields Ltd          102.4     106.6
  5. Goldcorp Inc.             78.4      75.3
  6. Newcrest Mining Ltd       72.8      49.2
  7. Kinross Gold Corp.        68.0      64.5
  8. Navoi MMC                 62.5      62.0
  9. Freeport-McMoRan          52.9      74.8
  10. Polyus Gold               43.1      39.2
  11. Harmony Gold Mining Co.   41.7      45.2
  12. Cia de Minas Buenaventura 34.1      41.2
  13. Agnico-Eagle Mines Ltd    30.7      15.3
  14. Zijin Mining Group Ltd    30.1      30.7
  15. Iamgold Corp.      30.1      29.2

The figures are interesting as they show an increase in production is most of the major gold producers between 2009 and 2010.

However, the exception is with the African and South African producers where production fell quite sharply. The trend of falling gold production in Africa continues.

Annual gold production in South Africa has plummeted to 220 tonnes - levels last seen in 1922.

South African gold output has been falling since 1970 when annual production was over 1,000 tonnes. Gold production peaked at this time and has been falling steadily. It has fallen by an incredible nearly 80% since 1970.

The phenomenon of “peak oil” is widely known of and debated however “peak gold” may be of as great import and may be a more realistic threat as a U.S. or global Depression would see demand for oil drop sharply.

This would not be the case with gold and indeed demand for gold should increase in that event – due to safe haven and monetary demand.

 
NEWS

Gold Surges to Record as U.S. Debt Impasse Threatens Default, AAA Rating
http://www.bloomberg.com/news/2011-07-25/gold-surges-to-record-as-u-s-debt-impasse-threatens-default-aaa-rating.html

China and Iran plan oil barter
http://www.ft.com/intl/cms/s/0/2082e954-b604-11e0-8bed-00144feabdc0.html#axzz1T68AVqEM

GLOBAL MARKETS-Stock futures drop, gold up on no US debt deal
http://www.reuters.com/article/2011/07/25/markets-global-idUSN1E76N0CC20110725

Gold hits record as US deficit talks stall
http://af.reuters.com/article/investingNews/idAFJOE76O02020110725

U.S. Stock Futures, Dollar Decline as Gold Gains as U.S. Debt Talks Stall
http://www.bloomberg.com/news/2011-07-24/u-s-stock-futures-dollar-decline-as-gold-gains-as-u-s-debt-talks-stall.html

COMMENTARY

Angela Merkel Faces Revolt in Germany Over Rescue Deal
http://www.telegraph.co.uk/finance/financialcrisis/8658331/Angela-Merkel-faces-revolt-in-Germany-over-rescue-deal.html

Swelling Nostalgia For Gold-Backed Money And A Balanced Budget Amendment
http://blogs.forbes.com/greatspeculations/2011/07/24/swelling-nostalgia-for-gold-backed-money-and-a-balanced-budget-amendment/

Gold and Silver Sales on eBay - Infographic
http://farm7.static.flickr.com/6127/5930742607_858e9be42b_o.jpg

How Americans buy gold and precious metals on eBay
http://blogs.reuters.com/reuters-money/2011/07/21/how-americans-buy-gold-and-precious-metals-on-ebay/

Citywire Montreux Video: the Philipp Vorndran Guide to Protecting your Assets
http://www.citywire.co.uk/global/citywire-montreux-video-the-philipp-vorndran-guide-to-protecting-your-assets/a491792

 

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Mon, 07/25/2011 - 07:26 | 1490040 Version 7
Version 7's picture

The phenomenon of “peak oil” is widely known of and debated however “peak gold” may be of as great import and may be a more realistic threat as a U.S. or global Depression would see demand for oil drop sharply.

You mean people won't have money for gas but will afford to buy gold?

Mon, 07/25/2011 - 08:15 | 1490113 GetZeeGold
GetZeeGold's picture

 

No.....rich people will realize they are not rich until they dump their worthess paper for gold......then they will really be rich.

Gold.....you can't print it. You have to go down a very deep hole to find it. Take the easy route and just pay cash. Let someone else do the hard work.

 

Mon, 07/25/2011 - 07:25 | 1490044 Id fight Gandhi
Id fight Gandhi's picture

Silver is under performing big time. Still taking lumps from the criminal CME manipulation a couple months ago. Just buy physical and horde it.

Mon, 07/25/2011 - 08:18 | 1490119 GetZeeGold
GetZeeGold's picture

 

Think of it as being subsidized......finally a welfare program for rich people.....think about it.

 

Mon, 07/25/2011 - 07:29 | 1490048 Id fight Gandhi
Id fight Gandhi's picture

Market is totally run by algos and machines now. How else would all this debt and defaults be shrugged off. Shit, even chipolte missed earnings last week and it still closed at a record high up 200 points in a year - fucking momo burrito shack!

I'll gladly be a coin clutcher than play in this mad house.

Mon, 07/25/2011 - 07:29 | 1490049 bullionbaron
bullionbaron's picture

A post on which Silver 1oz coins might be best to buy for those interested:

http://www.bullionbaron.com/2011/07/silver-bullion-coins-which-should-yo...

Mon, 07/25/2011 - 07:33 | 1490061 Id fight Gandhi
Id fight Gandhi's picture

Best deals are the us junk silver quarters, halves and dimes before 1965.

Mon, 07/25/2011 - 07:36 | 1490065 THE DORK OF CORK
THE DORK OF CORK's picture

I bought a dozen Mexican Libertads recently on the off chance it would be remonetized via a Hugo Salinas Price campagin............

 

Mon, 07/25/2011 - 07:29 | 1490050 Raymond K Hassel
Raymond K Hassel's picture

Now would be the perfect time for a truly half ass debt deal

Mon, 07/25/2011 - 07:37 | 1490066 Id fight Gandhi
Id fight Gandhi's picture

I would prefer them to use their whole ass.

Either way we get shit. Debt raised = dollar falls, default = dollar falls.

Mon, 07/25/2011 - 07:49 | 1490082 Al Gorerhythm
Al Gorerhythm's picture

Count on it.

Mon, 07/25/2011 - 07:30 | 1490053 css1971
css1971's picture

NOOOO!

Say it isn't so! Our politicians are liars and bankers are swindlers! If we can't trust them, what can we trust?

 

Mon, 07/25/2011 - 07:44 | 1490074 Silver Dreamer
Silver Dreamer's picture

This is my rifle. There are many like it, but this one is mine.

Mon, 07/25/2011 - 07:31 | 1490054 overmedicatedun...
overmedicatedundersexed's picture

quick fix for the debt in USA..sell the SPR millions of barrels of black gold would keep the gov going for months then sell gold  in fort knox (if any) then sell the city of San Francisco and you get the Idea..it could keep the ball in the air for years to come and nobody would have to face the music..in congress.. a win win  LOL.

Mon, 07/25/2011 - 07:38 | 1490068 theprofromdover
theprofromdover's picture

Just put out a rumour that all Credt Default Swaps are to be declared (illegal and) unenforcable.

That will start the big clean-up.

Mon, 07/25/2011 - 07:39 | 1490070 Sudden Debt
Sudden Debt's picture

The last debt ceiling raise that size made gold pop 300$ and boosted silver 50% and pushed the DOW 800 points higher.

BRING IT ON BITCHEZ!!

Let's hope inflation doesn't cause to many problems like it did for now.

 

Mon, 07/25/2011 - 07:48 | 1490079 Silver Dreamer
Silver Dreamer's picture

Inflation is good for you!

Mon, 07/25/2011 - 07:57 | 1490093 Temporalist
Temporalist's picture

Silver hit $41 on kitco charts.

Mon, 07/25/2011 - 08:02 | 1490102 ViewfromUnderth...
ViewfromUndertheBridge's picture

Well, to me that looked like short covering this morning "in Asia"...tomorrow is Options Expiry, what chance a Debt Ceiling agreement to co-incide with OpEx and a smash-down...by the clowns.

Mon, 07/25/2011 - 08:04 | 1490106 pmn
pmn's picture

Another Silver Drive-by shooting coming?

 

Eric Sprott just sold 1 million shares of PSLV…(The last time he sold was before the smack down he reinvested the money back into silver related assets.)

Options expiration on Tuesday…

Last week of July Delivery…

Seems like all of the stars are aligned for another silver drive by shooting.

http://goldsilvernews.blogspot.com/2011/07/another-silver-drive-by-shooting-coming.html

Mon, 07/25/2011 - 08:31 | 1490144 ViewfromUnderth...
ViewfromUndertheBridge's picture

That open was Johnny5 v. Joe Six...

Mon, 07/25/2011 - 08:48 | 1490178 MiningJunkie
MiningJunkie's picture

The JPMorg is going to try a raid in the gold pit today - let's see if they can out-muscle the Asians.

My bet is "not a Fucking Chance."

Mon, 07/25/2011 - 08:56 | 1490197 Developers
Developers's picture

...but a default is quite unlikely as ratings agencies may be unlikely to downgrade the U.S. with the global financial system already in such a precarious state.

In other words, ratings agencies are worthless.  Why are they even relevant?

 

Mon, 07/25/2011 - 09:17 | 1490220 Snidley Whipsnae
Snidley Whipsnae's picture

"There was some unusual selling in the electronic market prior to the open which saw prices fall from the close on Friday at $40.05/oz to $39.69/oz prior to the surge on the open."

LOL... who woulda thunk it???

Tue, 08/23/2011 - 23:23 | 1593515 karmete
karmete's picture

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