Today's AM fix was USD 1,618.75, EUR 1,274.81, and GBP 1,029.41 per ounce.
Yesterday's AM fix was USD 1,628.50, EUR 1,291.74, and GBP 1,040.31 per ounce.

Silver is trading at $28.43/oz, €22.46/oz and £18.13/oz. Platinum is trading at $1,480.75/oz, palladium at $624.30/oz and rhodium at $1,215/oz.

Gold dropped $7.80 or 0.48% yesterday in New York and closed at $1,619.60/oz. Gold traded flat to slightly higher in Asia prior to dipping in European trade after the London Am Fix.

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XAU/USD Currency Chart - (Bloomberg)

Gold dipped today despite Wall Street hopes that the US Fed will embark on more QE. As we have said for some time QE3, or a new term for electronic and paper money creation, is a certainty and this will lead to inflation hedging and safe haven demand for gold. 

US economic data has been very poor recently which is leading to hopes by Wall Street that Operation Twist may continue beyond its June deadline.

Most on Main Street continue to be wary of ultra loose monetary policies and the real risk of currency devaluations and serious inflation.

G20 leaders will watch a European summit next week where finance officials will examine deeper integration in the Eurozone including the creation of a banking union. 

There are hopes that something will be finalised by December however political obstacles mean the banking and fiscal unions will be nearly impossible to achieve. 

Smart Money Positioning For Summer and Autumn Rally
There continues to be much debate as to why gold has not risen or surged in value given the risks in the eurozone, the bursting Chinese property bubble and risks of a US and global recession or even Depression.

The fact that gold is 3% higher in dollar terms year to date in 2012, higher in other currencies and is again outperforming most other assets continues to be unacknowledged. 

However, the smart money (central banks, PIMCO, Soros, Faber, Einhorn, Bass  etc) continues to buy gold and is positioned for the possibility of a sharp upward movement in the price in the coming months.

There were similar sentiments expressed regarding gold in the first half of 2011 when gold had eked out limited gains in dollars and had traded sideways in pounds and euros.

All this changed in July and August when gold suddenly surged in all major currencies (see charts).

Gold fell in June 2011 in major currencies. It bottomed on July 1st 2011 when gold was trading at $1,488/oz, €1,024/oz and £925/oz (closing prices).

Gold then surged in July and August and reached record nominal highs in dollars, euros and pounds in early September.

The monetary metal reached closing highs of $1,900.30/oz (September 5th), €1,358/oz (September 9th) and £1,179/oz (September 5th).

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XAU/EUR Currency Chart - (Bloomberg)

Thus in just two months, gold made gains of 27.6% in dollars, 32.6% in the beleaguered euro and 27.4% in pounds sterling.

Similar gains were seen in all fiat currencies including Canadian dollars, Australian dollars, Singapore dollars, Norwegian krone, the Swiss franc and the 'safe haven' Japanese yen.

Many buyers who attempted to time the market and were not positioned for the rally missed the gains and therefore did not enjoy gold's gains in 2011.

Silver also rallied sharply from $33.88/oz to $43.75/oz - a gain of 29% in the 2 months.

However, silver has already seen a sharp move up in February, March and April when it had rallied from $28.53/oz to nearly $50/oz on April 28th - a massive gain of 75% in just 3 months.

Silver subsequently fell back to the $34/oz level prior to the strong gains seen in July and August.

Given the still strong fundamentals for gold, we believe that gold may replicate the performance seen in July and August 2011.  

While history never repeats, it has a habit of rhyming and those who fail to learn their history are condemned to repeat it.

While gold may repeat its significant gains seen last summer, gold buyers should as ever be motivated not simply by capital gains - as welcome as they always are.

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XAU/GBP Currency Chart - (Bloomberg)

Buyers should focus on the fact that physical gold bullion, either in your possession or stored in the safest vaults in the safest jurisdictions in the world, will hedge against currency devaluation and debasement.

Gold will also act as a liquid safe haven in the event of a systemic financial crisis involving capital controls, ATM and deposit withdrawal restrictions and bank 'holidays'.