Merkel and Sarkozy Plans Fail to Assure Markets - New Record Nominal Gold High (USD London Fix)

The London AM fix in USD was a new record nominal high. Gold’s London AM fix this morning was USD 1,792.00, EUR 1,240.39, GBP 1,089.96 per ounce (from yesterday’s USD 1,779.00, EUR 1,236.18, GBP 1,086.81 per ounce see LBMA).

Bloomberg ‘Chart of the Day’

Euro gold is higher again today despite the meeting and at €1,238/oz remains close to record nominal highs of €1,283/oz. Sterling is down 0.45% against gold after the poor UK jobs number. The Swiss franc has surged against all currencies including gold but remains over 1,400 CHF/oz.

Gold in Euros – 30 Day (Tick)

The Merkel Sarkozy plans to centralize financial and economic governance in the EU has failed to calm markets and there is further weakness in stock markets today. 

A key aim of the meeting was to restore confidence in the euro. In the short term this has not been achieved and it is highly unlikely that it will be achieved in the long term. 

Centralised financial and economic governance will not be a panacea to the current debt crisis. It does nothing to address the root cause of the problem which is massive indebtedness and the saddling of taxpayers with massive liabilities incurred by banks.

Concerns about currencies and currency debasement is leading to continued safe haven demand for gold.

Cross Currency Rates 

Demand for coins and bars in Europe remains strong and is increasing. It remains small compared to allocations to other asset classes suggesting that recent increases in demand for physical are sustainable.

Demand for bullion in Asia remains robust as seen in premiums in India, Singapore and Hong Kong. Gold bar premiums in Hong Kong remain steady at 50 cents to $1.00 per ounce above spot gold. 

Higher and record nominal prices is not deterring store of value and safe haven buyers internationally. This should support gold and ensure that any correction is again short and shallow. 

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