Gold surged to a six week high in dollar terms and new record nominal highs in euros and sterling. Concerns about the eurozone and UK economies and the impact that the unprecedented monetary and fiscal policies being undertaken will have on the value of the respective currencies has led to them falling in value versus the dollar and gold. There are hopes that the just announced massive Greek deficit cuts of €4.8 billion will stem the tide of the declining euro. Concerns that the austerity measures being taken in Greece may soon have to be undertaken in other European economies and in the UK should lead to continuing safe haven demand for gold.
While gold remains near record highs in the major currencies, it is important to remember that these are nominal highs and gold remains below its inflation adjusted highs of the early 1980s in all currencies. Gold has been rising at roughly 10% per annum in the last decade against the various paper currencies and is now up some 3 to 4 fold in the major currencies. While this may seem like a lot it is important to remember that bull markets rarely end until prices of assets reach their previous inflation adjusted high.
In the 1970s, the last time gold was in a bull market, gold rose 25 fold in dollar terms, from $35/oz to over $850/oz. It also rose massively in sterling, from £20/oz to over £300/oz or 15 times. And massively in German marks and in all other major currencies. Concerns about the long term outlook for the value of fiat currencies and of the threat of inflation is leading many investors and savers internationally to look to have an allocation to the store of value and financial insurance that is gold. This will likely continue for the foreseeable future and creates the possibility that gold will target its inflation adjusted record high in major currencies of 30 years ago in the coming months.
Silver As ever, silver continues to outperform gold and rose nearly 3% yesterday. It has jumped from $16.92/oz to $17.10/oz so far in Asia. Silver is currently trading at $17.09/oz, €12.50/oz and £11.34/oz. Silver remains very undervalued versus gold at 66.5 on the gold/silver ratio and remains far from recent and long term record (nominal) highs (in dollars and other major currencies).
Platinum Group Metals Platinum is trading at $1,580/oz and palladium is currently trading at $445/oz. Rhodium is at $2,575/oz.
News - Equity markets are slightly lower in Europe after a mixed performance in Asia overnight (most indices slightly higher but the Hang Seng and Malaysian and Indonesian bourses lower).
- Crude oil has backed off the psychological $80 a barrel level risen to yesterday. The recent rise in oil prices is leading to inflationary fears and likely contributed to gold's rise yesterday.
- German retail sales were stable in January after falling 3.4% the previous month. The latest survey of consumer confidence showed that Germans have added concern over the Greek debt crisis and the euro to worries about unemployment. German consumer confidence fell for the fifth month in a row which will lead to continuing risk aversion among German investors and savers and a continuing strong demand for gold in Germany.
- The FTSE is down some 0.5% despite the positive service sector data which showed UK service sector growth at a 3 year high.