Gold’s London AM fix this morning was USD 1,638.75, EUR 1,244.68, and GBP 1,014.83 per ounce. Yesterday's AM fix was USD 1,632.00, EUR 1,240.97 and GBP 1,014.42 per ounce.
Silver is trading at $30.85/oz, €23.43/oz and £19.10/oz. Platinum is trading at $1,550.00/oz, palladium at $671.25/oz and rhodium at $1,350/oz.
Gold fell $3.80 or 0.23% in New York yesterday and closed at $1,638.20/oz. Gold has been trading mostly sideways in Asia and within a narrow 8 point spread. In European trading it remains near the close seen in New York yesterday.
Cross Currency Table – (Bloomberg)The perfect storm trifecta of bad political and economic news yesterday out of France, Holland and Germany led to risk off and falls in many markets. Gold performed well and was resilient considering the sell off seen in equity markets.
Dutch Prime Minister Mark Rutte speaks in parliament today after tendering his Cabinet’s resignation to break a deadlock over further austerity.
French President Nicolas Sarkozy and Francois Hollande will face off in a 2nd round ballot on May 6th and the prospect of Hollande taking power is making European markets jittery.
The euro region has government debt at 87.2% of GDP last year, which is the highest since the start of the euro in 1999.
Manufacturing data from Europe and China contracted in data released yesterday showing how economic conditions appear to be deteriorating.
With the euro zone political landscape in crisis mode and data showing business contracting many investors are putting their capital in dollars and US Treasuries.
Gold 1 Year Chart – (Bloomberg)So far gold has not been a prime beneficiary of these risks but this will likely change soon – especially if financial conditions deteriorate which seems very likely.
Gold has recently displayed short term correlations with paper assets such as equities and bonds but these correlations will again be shown to be fleeting as gold’s long term inverse correlation with paper assets will reassert itself in the coming months.
Mexico, Russia and Central Banks Continue Diversifying into Gold
While gold demand from the western investors and store of wealth buyers has fallen in recent months, central bank demand continues to be very robust and this is providing strong support to gold above the $1,600/oz level.
IMF data released overnight shows that Mexico added 16.8 metric tons of gold valued at about $906.4 million to its reserves in March.
Russia continued to diversify its foreign exchange reserves and increased its gold reserves by about 16.5 tons according to a statement by its central bank on April 20.
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