"All Fiat Currencies Are Being Debased And Devalued And They Are Losing Value Over Time"


Today’s AM fix was USD 1,602.25, EUR 1,232.97 and GBP 1,053.70 per ounce.
Friday’s AM fix was USD 1,611.50, EUR 1,246.62 and GBP 1,059.99 per ounce.

Gold was +1.01% and silver -0.14% higher for the week.

Gold fell $6.80 or 0.42% and closed Friday at $1,607.60/oz. Silver hit a low of $28.52 and finished -1.54%. 

Gold is slightly lower in most major currencies this morning but remains near 4 week highs, underpinned by safe haven demand. Gold is flat in yen terms with the Japanese currency falling again today.

Gold bullion had its third consecutive weekly rise last week and rose 1% to close at $1,607.60.oz.

Gold in USD – March 2010 – Today 

Importantly, Cypriots and other Eurozone citizens who own gold saw the value of their holdings rise 2% in euro terms.

While the risk of financial meltdown in Cyprus has been averted, the risk of contagion in the Eurozone remains. Wealthy individuals, businesses and corporations will likely begin moving some of their deposits from banks in Spain and Italy thereby deepening the crisis in these countries and the Eurozone.

Burning senior bond holders could create contagion again in European debt markets and now in addition to that bureaucrats have managed to make depositors in periphery nations nervous about their deposits in banks. This could precipitate bank runs in Greece, Spain and Italy with obvious negative ramifications for the entire EU banking and financial system.

Cyprus is a little domino which has fallen and may knock the larger more important dominos of Spain and Italy thereby creating contagion in the Eurozone. Especially as the political backlash against the EU and Troika is likely to be substantial and could lead to more power being gained by parties and movements that advocate leaving the European Monetary Union and indeed the European Union.

The cost of averting a Troika induced financial meltdown may condemn Cyprus to becoming an economic basket case with a vastly diminished financial sector and dependence again on agriculture and tourism. 

Gold Large Specs, Futures – March 2010 – Today 

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended March 19, according to U.S. CFTC data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 135,610 contracts on the Comex division of the New York Mercantile Exchange, the Commitments of Traders (COT) report showed. Net-long positions rose by 21,103 contracts, or 18%, from a week earlier (see chart above). 

Gains in recent weeks were in part due to short covering by hedge funds and banks. There is the possibility of the much more short covering and also the likelihood that traders will now go long again which allied with physical demand could push prices higher again in the coming weeks.

GoldCore’s Director of Research, Mark O’Byrne was interviewed on Bloomberg Television’s "On the Move" by Francine Lacqua this morning. To listen to the full interview click here.

Despite gold being slightly weaker today after the announcement of the Cyprus deal, O'Byrne advised that anything can happen in the short term and it is important to focus on the long term.

He pointed out that although gold is down in dollar terms year to date, in yen terms and sterling terms, gold is actually higher - up 4.5% and 2.5% respectively. Gold has risen 3 weeks in a row now and Cyprus may mark a bottom for gold.

The demise of gold and the "death of the gold bull market" is "greatly exaggerated" says Mr. O’Byrne.

He said that while the risk from Cyprus has abated, in the light of capital controls in EU country and the treatment of Cyprus, there are now huge question marks over the future of the European Union itself.

When questioned about gold reaching new record highs, O'Byrne said that people need to focus on gold’s value as a “safe haven” not solely gold’s price.

Mr. O’Byrne asserts the yellow metal’s nominal high in 1980 was $850/oz, and the inflation adjusted high of $2,400/oz we believe is likely within 12-18 months. People should not be "buying simply for the capital gain, gold is more important for hedging and diversification."

When asked if the dollar is to increase further? Mr. O’Byrne notes that the U.S. has over $16 trillion in national debt and between $50 trillion and $100 trillion in unfunded liabilities.

"I don’t know how people can be bullish about it long term."

In bull markets, markets climb a wall of worry and weak hands get shook out. Sticking with your position in the long-term and buying the dips is always prudent.

He concluded by saying "all fiat currencies are being debased and devalued and they are losing value over time." 


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