Concerns that the US economy is sliding back into recession has led to equities internationally coming under pressure and further flows into safe-haven assets. Gold and silver have consolidated from last week's gains and remain near closing levels from yesterday and last week. The yen - a preferred carry trade at times of financial stress - rose back to a 15-year high against the dollar as doubts remain about Japan's attempt to weaken the currency. Interestingly, despite the yen's recent strength, gold remains near multiyear record highs in the Japanese currency (see chart).
Gold is currently trading at $1,233.70/oz, EUR972.03/oz, lb800.32/oz.
Cross Currency Rates at 1000 GMT
Benchmark German government bond yields hit record highs and the Swiss franc rose against all currencies (see table). Gold is slightly weaker against most currencies but is flat in British pounds and has surged in New Zealand dollar which is under pressure. Asian markets were down (especially the Nikkei - down 3.55%) and European indices have followed lower.
Gold in Yen - 5 Year (Daily)
Gold's most accurate forecasters say the current bull market has further to go no matter what the economy holds, according to Bloomberg. Analysts raised their 2011 forecasts for gold more than for any other precious metal the past two months, predicting a 10th annual advance, as shown by data compiled by Bloomberg. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18% more than the inter day record $1,266.50/oz reached June 21.
Gold may rise as high as $1,500/oz next year, 21% more than the $1,237/oz traded at 5:30PM in London yesterday, according to the median in a Bloomberg survey of 29 analysts, traders and investors. Bullion has gained 13% since January, beating a 7.9% return on Treasuries, a 7.2% decline in the MSCI World Index of shares and the 9.4% slump in the S&P GSCI Total Return Index of 24 raw materials.
Growing US economic concerns should see safe havens such as gold and silver remain well bid at these levels.
Silver is currently trading at $18.91/oz, EUR14.90/oz and lb12.27/oz.
Platinum is trading at $1,508.15/oz, palladium is at $486/oz and rhodium is at $2,050/oz.
Mark O'Byrne is managing director of Ireland-based GoldCore.
