Goldis little changed in London trading this morning with slight losses indollar and euro terms and slight gains in Swiss franc and British poundterms. Expectations of more quantatative easing (QE2) are leading tofurther dollar weakness and continuing strength in commodities andprecious metals. Gold could see a pullback on the QE2 announcement aswe may see a "buy on the rumor, sell on the news" reaction fromtraders. However, the pullback would likely be another correction asphysical demand, particularly from central banks, looks set to remainelevated for the immediate future.
Gold is currently trading at $1,347.13/oz, €960.18/oz, £854.51/oz.
Gold in GBP - 20 Day (Tick).
Gold in sterling remains near record nominal highsas the new United Kingdom government embarks on a radical fiscalexperiment involving some £81 billion of public spending cuts and some500,000 job cuts. The risk is that the cuts lead to further economicweakness and a double dip recession. Ironically, the dramatic cuts inand of themselves would likely be positive for sterling in the longterm as the UK attempts to get its financial house in order. However,the UK's extraordinarily loose monetary policy and the risks posed by anew round of QE2 could lead to sterling coming under pressure in thelong term. Currency markets are becoming increasingly aware of the realrisk of the debasement of major currencies such as sterling.
Gold in EUR - 20 Day (Tick).
While the euro has strengthened against the dollarin the last month, it has only risen slightly in gold terms. Theeurozone sovereign debt crisis has abated for now but the real risk isthe long term one posed to the European Monetary Union. These riskshave recently been annunciated by as warned of by some of the mostrespected financial minds in the world including Stiglitz, Soros andBuffett. These long term concerns should see the euro continue to comeunder pressure versus gold in the coming months.
Gold in USD - 30 Day (Tick).
Geopolitical tensions betweenthe US and western powers and Iran continue and may be leading toIranian resource nationalism. Iran's gold reserves have hit a recordhigh according to Central Bank Governor Mahmoud Bahmani. He said thatIran has supplied its domestic gold market for the next ten years andthat "regardless of the recession gripping most of the world in 2008and 2009, Iran's exports rose 10%, reaching $18.3 billion." He claimedthat the economic breakthrough came despite the West's efforts to putmore pressure on Iran over its nuclear program.
Potentially, more of a risk are reports that Chinamay slash exports of rare-earth elements next year as it is formulatinga plan to protect its supply of the valuable material needed inadvanced industrial and military products. President Barack Obama'sspokesman said the National Security Council staff is looking intoreports that China is blocking shipments. Press secretary Robert Gibbstold reporters travelling with Obama on a West Coast campaign trip"They've seen the reports" and "they're looking into them but don'thave anything they could confirm about those reports."
Despite a large number of warnings from intelligenceagencies of an increased risk of terrorist attacks, geopolitical risksincluding those posed by terrorism are not to the forefront ofinvestors' minds right now. All that could change very quickly in theevent of another terrorist attack on a major western city.
Silver
Silver is currently trading at $23.90/oz, €17.06/oz and £15.18/oz.
Platinum Group Metals
Platinum is trading at $1,679.50/oz, palladium is at $594/oz and rhodium is at $2,175/oz.
Mark O'Byrne is managing director of Ireland-based GoldCore.