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Gold is trading at USD 1,718.09, EUR 1,275.40, GBP
1,113.33, JPY 130,935.64, AUD 1759.15 and CHF 1,556.07 per ounce.
Gold’s London AM fix this morning was USD
1730.00, EUR 1,279.68, and GBP 1,119.81 per ounce.
Yesterday’s AM fix was USD 1,765.50, EUR 1,310.40,
and GBP 1,144.35 per ounce.
Gold is being liquidated on the back of a global
liquidation event sparked by the FED's view that economic growth in the U.S.
will be severely curtailed for the foreseeable future. There had been a
general lack of consensus on global growth amongst market participants on the
shape it will take and where the opportunities will be for investment into
the future. The FED's statement has now nudged that lack of consensus into
bearish territory by signalling that growth will be
lower. Thus, any and all market exposure is being lowered to a level
commensurate with this new view.
Gold has been increasingly seen as excellent hedge to
such risks, but alas market participants lowered their exposure in a less the
orderly manner (aka panic) and gold was liquidated in tandem. Gold’s
price correction though is probably more of a dollar
strength then a gold negative perception.
Official rhetoric is stepping up a gear and it is
notable that some leaders, namely UK, Australia, South Korea, Canada, and
others, are making what can only be described as a plea to the G20 and the
incoming president Sarkozy to act decisively to manage the crisis and return
the global economy to stable growth. Such public pleas are designed to
capture the public's attention and apply domestic pressure to key leaders to
enact changes that are needed to force a solution through the crisis.
Sarkozy and Cameron on their recent trip to Tripoli
Gold may continue south in the short term as the rush
to the exit continues, but as markets begin to price in a consensus on medium
economic growth (or decline) prospects, gold should reaffirm its longer term
credentials as a hedge for macro risk par excellence.
The Cameron letter makes interesting reading and is
reproduced below.
"President Sarkozy,
Three years after our first Leaders’ meeting,
reverberations of the global financial crisis are still being felt by
citizens and governments around the world. For many advanced economies the
path out of the deep and prolonged recession will be difficult. This will
impact on growth in emerging markets, and there is more limited room for manoeuvre than in 2009.
We fully support your call yesterday that the priority of
the G20 must be to “help the world find the path to growth”. We
will give our full backing to your Presidency in achieving this at the Cannes
Summit in November. We need decisive action to support growth, confidence and
credibility.
We have not yet mastered the challenges of the crisis.
Global imbalances are rising again. External risks to the stability of our
banks and our economies are reaching pre-crisis levels. And volatile and high
energy prices are hurting our citizens and acting as a drain on world growth.
At the same time, the confidence of citizens,
businesses and markets has been damaged due to the lack of visible political
will: this in itself is holding back the recovery. Over the summer, the
difficulties encountered in finding a durable solution to sovereign debt
problems have further affected confidence.
The G20, representing 85pc of the world economy, is our
platform to address these challenges. Under your leadership in Cannes, we
have the opportunity to commit to each other to take the actions we know are
necessary. We must agree the hard policy decisions we should each take,
validating our actions against strong objective analysis and recommendations
from the relevant international institutions. And, within the Framework for
strong, sustainable and balanced growth agreed in Pittsburgh, we must each
act on those decisions. Only when we work together can we restore strong
growth and the confidence on which it depends.
The priorities are clear.
We must increase global demand without once again
creating unsustainable global imbalances. Surplus countries need to increase
their expansion of domestic demand, enshrining their policies in clear
political commitments within the G20 including on structural reform, to keep
markets open, increase exchange rate flexibility and refrain from competitive
devaluation. Deficit countries need to find new sources of growth, including
making clear commitments now to put in place specific structural reforms
necessary. They need to restore competitiveness and improve the underlying
performance of their economies.
Eurozone governments and institutions must act swiftly
to resolve the Euro crisis and all European economies must confront the debt
overhang to prevent contagion to the wider global economy. The July agreement
to strengthen the Eurozone Financing Facility was an important first step.
Euro countries now need to ratify this agreement as soon as possible,
alongside implementing reforms to deal with excessive deficits, improving
economic competitiveness, and acting now to strengthen banking systems. The
Eurozone must look at all possible options to ensure long-term stability in
the world’s second largest international currency.
Countries with long-term debt problems must put in
place and implement credible growth-friendly medium-term fiscal consolidation
plans, differentiated according to each country’s own national
circumstances. The United States, as the world’s largest economy, also
has an important role to play in restoring confidence. The August bipartisan
deal lays the foundations for a deficit reduction plan and President Obama's
jobs plan will help provide a welcome impetus to growth in the short term.
The US, along with other high deficit advanced economies, needs to overcome
the remaining hurdles towards restoring medium-term fiscal sustainability.
The failure to date to conclude a global trade deal is
robbing the world of a much-needed economic stimulus. It is also affecting
public confidence in our ability to deliver what leaders have promised to do
repeatedly. We should agree in Cannes a credible plan to take to the WTO
ministerial in December as a basis for concluding the Doha Development Round.
If we cannot agree this we should direct our Ministers to consider innovative
approaches to deliver progress in a multilateral trade deal and strengthen
the multilateral trading system. International trade can be the engine of
global growth and development and we must keep it moving forwards.
In taking forwards all these actions, the G20 must also
take a path toward all-embracing growth, supporting economic development that
will help reduce global disparities.
The barriers to action are now political as much as
economic. We must send a clear signal that we are ready to take the actions
necessary to maintain growth and stability for all for the future. The G20
showed at the height of the global financial crisis that we could work
together to deal with global instability - the Cannes Summit is an
opportunity for leaders to prove this, arrest the slide in confidence, and
strengthen the foundations for strong, sustainable, and balanced global
growth for the future.
Prime Minister Gillard of Australia;
Prime Minister Harper of Canada;
President Yudhoyono of Indonesia;
President Calderon of Mexico;
President Lee of South Korea; and
Prime Minister Cameron of the United Kingdom"
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SILVER
Silver is trading at $32.28/oz,
€24.06/oz and £20.98/oz
PLATINUM GROUP METALS
Platinum is trading at $1,629.70/oz, palladium at
$638/oz and rhodium at $1,675/oz.
NEWS
(New York Times)
A Gold Rush Wanes as Hedge Funds Sell
(The Telegraph)
David Cameron: world on brink of new economic crisis
(Reuters)
G20 pledges bank support, eyes bolder euro fund
COMMENTARY
(MarketWatch)
Is market replaying decade of the 1930s?
Mark O’Byrne
Goldcore
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