Cross Currency Table
Gold has fallen in all currencies today as equity and
commodity markets have seen weakness due to concerns about
Chinese economic growth after China's economy eased somewhat.
Germany's pouring cold water on the likelihood of a speedy
resolution of the euro zone's debt crisis and the summit this
weekend has also increased market jitters.
Gold continues to be correlated with equities in the short
term but we are confident that this correlation is short term in
nature and the inverse correlation between gold and equities and
bonds will again be seen in the medium and long term.
Gold in USD - 30 Day (Tick)
Gold priced in euros has fallen less than other currencies as
the euro has fallen against most currencies today on concerns
about the debt crisis and after another fall in German investor
XAU-EUR Exchange Rate - 30 Day (Tick)
Peripheral European debt markets are showing weakness again.
The recent trend of falling yields appears to have ended
which is worrying. Should yields begin to rise again this should
create added safe haven demand for gold.
UK inflation rose to match a record high of 5.2% (
) and retail price inflation (
), a measure of the cost of living used in wage negotiations,
accelerated to 5.6% (from 5.2%), the highest since June 1991.
The figures were again worse than expected by the BoE,
economists and many economic experts who have been
underestimating the threat of inflation for some time.
The BoE, like the Federal Reserve, continues to follow an
ultra loose monetary policy in an effort to boost an economy
teetering on the brink of a double dip recession.
Second quarter UK Gross Domestic Product (
) shocked the markets by showing a disappointing 0.1% growth in
the economy, down from a 0.2% increase in the first quarter.
The UK appears to be entering stagflation with declining
economic growth and stubbornly high inflation seeming
increasingly likely. Whether stagflation becomes as intractable
and long lasting as was seen in the 1970s remains to be seen but
it would be foolish to completely ignore the risk of stagflation
- both in the UK and in most debt saturated western
XAU-GBP Exchange Rate - 30 Day (Tick)
Given the macroeconomic backdrop, the case for owning gold as
part of a diversified portfolio remains strong.
Slow global growth and the risk of a global recession, ultra
low interest rates and increasing inflation in most markets means
that owning gold remains prudent.