Gold: An Excellent Measure of Global Macroeconomic Risk

Gold; Gold experienced yet another strong opening Monday morning and ventured deeper into unchartered territory. Currently trading at $1,109/oz - $14 higher than its closing last Friday - at this price gold sets a new all time high in USD terms. In EUR and GBP terms gold is trading at €739/oz and £658/oz respectively.

Gold’s move higher is indicative of continuing and deep routed concerns over the future of the dollar as the world’s reserve currency. World dollar holders from Asian Central Bankers to global pension fund managers are struggling to quantify a future without a stable reserve currency. Gold prices are an excellent measure of global macroeconomic risk. The ultimate cost of quantitative easing and building inflation pressures may well dampen any near term recovery projections.

Silver: Silver is currently trading at $17.72/oz, €11.82/oz and £10.71/oz.

Platinum Group Metals: Platinum is trading at $1,360/oz and rhodium at $2,025/oz. Palladium is currently trading at $333/oz.

Disclosure: no positions

Comments

[Faisal Humayun:]

There is no doubt that the Dollar would be trending down in the long term and Gold will be trending upwards...However, it would not be surprising to see Gold correct in the near term as it has outperformed all asset classes since October 2007 and hence is relatively overvalued...

However, factors like sustainable economic growth and inflation are keeping gold at higher levels...If Gold does correct 15-20% or more then it would be a great buying opportunity in my opinion...

Nov 10 04:48 AM

[The Recusant:]

Faisal Humayun wrote: "Gold...has outperformed all asset classes since October 2007 and hence is relatively overvalued..."

Nothing can become "overvalued", it is valued at what the current value that investors feel it is worth. If they change their mind, then the value goes down, if not, it can continue to climb theoretically forever. It may be overvalued to you, meaning you do not place as much value on it. But it would be wrong to assume its value for everyone is the same as it is for you. For instance, I dislike and place little value on certain artist's work, but the work still has great value to others and is priced accordingly.

Nov 10 09:43 PM