Gold's London AM fix this morning was USD 1,829.00, EUR
1,339.33, and GBP 1,160.46 per ounce. Yesterday's AM fix was USD
1,806.00, EUR 1,326.38, and GBP 1,143.33 per ounce.
Cross Currency Table
Gold remains well bid above the $1,800/oz level as value
buyers continue to diversify into safe haven bullion due to the
real risk of contagion in Europe and globally.
Normally gold's sell offs are swift and sharp with a series of
consecutive daily down days seen. This is not happening and
yesterday's rise suggests that gold may be bottoming after a
Technically, gold would need to close the week higher before
the somewhat negative short term technical picture was
Gold Spot Dollar/oz (G14 30 Days -
Volatility and wild gyrations in all financial markets
continues due to a confluence of negative data, news and
French banks have been downgraded and Chinese Premier Wen's
call that Europe get its own house in order quashed the
unsubstantiated and unsourced rumors regarding massive Chinese
intervention to solve the Eurozone debt crisis.
European banks are hemorrhaging deposits as savers and money
funds pile into other perceived havens such sterling, dollar and
Swiss franc deposit accounts. Retail and institutional deposits
at Greek banks fell 19 percent in the past year and almost 40
percent at Irish lenders in 18 months.
A tiny fraction of these European deposits has gone into gold
with the majority going into other fiat currency deposits. It is
not just the saver of periphery nations who are opening non euro
deposit accounts - many German savers are opening up deposit
accounts in Switzerland.
Greece's inevitable default is being prepared for despite the
usual denials. A conference call among Greek Prime Minister
George Papandreou, French President Nicolas Sarkozy and German
Chancellor Angela Merkel is set for 16:00 GMT.
More obfuscation and delusion is likely unfortunately but it
may lead to another misguided bout of irrational exuberance and
excessive risk appetite.
The reality is that a default by Greece is inevitable and
indeed a breakup of the European monetary system and reversion by
some countries to national currencies seems increasingly
XAU-GBP Exchange Rate (G14 30 Days -
A Jefferies report suggesting that Europe is about to
experience a Lehman Brothers collapse and splintering of the
Eurozone continues to be digested and reverberate around global
The report echoes and confirms what more astute observers,
including GoldCore, have been warning of for some time.
The author is David Zervos, Managing Director and the Head of
Global Fixed Income Strategy at Jefferies and a former Federal
Reserve official (Visiting Advisor in the Division of Monetary
Affairs in the Federal Reserve Board in Washington DC).
The Jefferies report first covered on Zero Hedge warns of "a
move towards financial market nationalization that will make the
U.S. experience look like a walk in the park."
They warn of a breakup of the euro and periphery countries
returning to their respective currencies - the escudo, lira,
punt, peseta and drachma. However they focus on Portugal, Ireland
and Greece or what they term the 'PIG'.
"The most likely scenario for these countries is full bank
nationalization followed by exit and currency
The report points out the disparity between the U.S. CDS price
and the German CDS price (50bps and 90 bps
This shows that contagion is taking place.
"Bunds are not a safe haven in this world - and there is no
place in Europe that will be immune from this dislocation."
The 'Perfect Storm' is a much bandied about and over used term
but it does capture the scale of the challenges facing us
Contagion is here and now and we are witnessing a 'Perfect
Storm' involving a global banking and sovereign debt crisis
leading to an international monetary crisis.
XAU-EUR Exchange Rate (30 Days - Bloomberg)
The scale of the debt crisis is so humongous that it is now
beyond the scope of policy makers and central banks to sort
The primary response so far has been socialization of risk
(taxpayers bailing out banks), competitive currency devaluations
and the debasement of major currencies internationally.
If this response continues - it will ultimately lead to an
international monetary crisis.
Global property bubbles, leveraged finance and high risk
securitization was the elephant in the room in the years prior to
the start of global financial and economic crisis in 2007. Many
warned but were ignored.
Now the elephant in the room is the growing risk of an
international monetary crisis due to the real risks posed to the
global reserve currency the dollar and to the not so 'single'
currency', the euro.
Gold will continue to act as a safe haven asset and protect
people in the event of an international monetary crisis.