Concerns that the sovereign debt crisis may be entering a new phase and the risk of contagion has seen peripheral eurozone bonds fall sharply and the euro fall against major currencies and gold today.

Sovereign debt risk, global inflation concerns, geopolitical risk, disappointing European earnings and concerns about Japan's coming reporting season have seen equities weaken and new record nominal highs for gold and silver (all time and 31-year).

Cross Currency Table

Greek bond yields have continued their relentless march higher and have risen above 14.07% (10-year) and Portuguese debt (10-year) has risen to a euro era record over 9.27%. Spanish and Irish debts are also under pressure this morning.

Gold in EUR - 1 Year (Daily)

Euro gold has been in a range between €900/oz and €1,070/oz for nearly a year (since last May - see chart) and this period of consolidation looks set to come to an end as gold pushes higher. Once the technical resistance at the record high of €1,072/oz (12/28/10) is breached, gold will challenge €1,100/oz.

In the current bull market, euro gold has seen many long periods of correction and consolidation prior to rapid gains and sharp moves upwards. The length of the recent correction (almost a year) suggests that the coming move could be very sharp and see gold rise to €1,200/oz in the coming weeks.

Cross Currency Table and Precious Metals

Gold is increasingly being seen as the superior currency in a world of trillion dollar and euro deficits and bailouts. Indeed, the printing and electronic creation of billions and trillions of the major paper currencies is increasingly making gold and silver the currencies of last resort.

Governments and central banks are debasing currencies through bailouts, deficit spending and quantitative easing that is leading to a massive increase in the supply of fiat currencies. Precious metals are rare and finite and this is why major currencies are falling in value versus gold and silver.

One of the largest pension funds in the world, the University of Texas Investment Management Co (which manages the endowment for the Texas teachers pension fund), has realised this and has put 5% of the pension fund into gold bullion (see news).

Unusually, but likely to be seen more frequently in the coming weeks and months, the pension fund has opted to own physical bars worth nearly $1 billion dollars in allocated accounts.

The fund has previously expressed concerns about the counterparty risk in ETFs. However, the reason given for opting for taking delivery of 100 oz gold bars in a warehouse was that if the holders of just 5 percent of COMEX futures contracts opted to take delivery of the metal, there wouldn't be enough to cover the demand leading to a COMEX default.

The risk of a COMEX default increases by the day and appears to be moving from the realms of a conspiracy theory to that of of course we knew it would happen, it stands to reason and was inevitable.

A COMEX default would have serious ramifications for the dollar and all fiat currencies as it would further erode trust in central banks, fiat currencies and today's monetary system.


Gold is trading at $1,482.65/oz, €1,035.43/oz and £910.80/oz.


Silver is trading at $42.81/oz, €29.91/oz and £26.31/oz.

While silver is overbought in the short term, the fact that silver remains in backwardation even after the recent sharp move up suggests that higher prices may be imminent and the 1980 nominal high of $50/oz may be reached sooner that most expect.


Platinum Group Metals

Platinum is trading at $1,783.50/oz, palladium at $755/oz and rhodium at $2,300/oz.