Gold and silver are higher again today with the U.S. dollar and yen in particular under pressure as concerns about the outlook for growth in Japan, the UK, the EU and the U.S. deepen. Gold reached new record nominal highs in sterling yesterday at £949.83/oz on concerns about the UK economy.

The risk of contagion in the Eurozone remains and could see the single European currency project unravel which would negatively impact on the global financial and monetary system.

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Cross Currency Rates

Worries about contagion will prove long lasting and this will see sustained investment demand for gold.

Whether the euro as we know it will survive the current crisis remains in doubt. Gold's finite nature and the fact that is not dependent on the performance of central banks and sovereign governments make it an increasingly attractive alternative to dollars, euros and other currencies.

Diversification away from the dollar and euro, and dollar and euro-denominated assets is set to continue with Asian currencies, gold and silver likely to be the primary beneficiaries.

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Gold in US Dollars - 30 Days (Tick)

Gold has consolidated and gradually risen since the selloff in early May and looks healthy both technically and fundamentally.

This could result in the record nominal high of $1,577.57/oz being challenged sooner rather than later - especially as we are less than 2% away from the recent record high. The psychological level of $1,600/oz is the next target and should be quickly reached once $1,577.57/oz is breached.

Strong support is now seen between $1,460/oz and $1,500/oz where good physical buying has been consistently seen.

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Gold in US Dollars - 180 Days (Daily)

Media coverage of gold and the merits of diversification into gold remains extremely limited - particularly in the UK and Ireland. Gold remains taboo and is covered rudimentarily and skeptically every few months in many media outlets.

The suggestion that gold is a bubble continues - especially among non-gold experts. This has been taking place since gold rose above $850/oz more than three years ago - back in early 2008.

There continues to be a peculiar desire to call the top of the gold market. This is especially the case among analysts who failed to warn regarding the recent stock and property bubbles.

There continues to be an absolute failure to understand gold's importance as a portfolio diversifier and a safe haven asset.

The fact that gold has retained value throughout history and will continue to retain value is not appreciated by most.

Whether gold goes up or down this month or this year is not important. What is vitally important is how gold retains its value, especially versus fiat paper currencies over the long term.