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  • Gold price held up by sick dollar 0 comments
    Aug 16, 2011 10:47 AM | about stocks: PPLT, GLD, PHYS, PSLV, PALL

    GoldMoney bar Stocks and commodities gained yesterday as traders returned to “risk” assets. The silver price was a beneficiary of this move, moving from under $39 per troy ounce to an intraday high of over $39.8. Silver fell back later in the day, however, with the August Comex silver contract settling up by 19.7 cents (0.5%), at $39.30. Palladium prices traded sideways for the day, though platinum recorded a modest price increase.

    Interestingly, last week saw the gold price exceed the platinum price for the first time since December 2008, providing a useful demonstration of the extent to which the latter is an industrial and consumer metal – in contrast to gold. When economic conditions eventually pick-up, platinum will start to outperform gold. However, it’s worth bearing in mind that unlike gold, governments have never confiscated platinum. That alone is a unique safe-haven attribute that should not be overlooked when it comes to assessing the relative virtues of these metals.

    Weakness in the dollar contributed to gains in the gold price, with the Comex August contract settling up by $15.30 (0.9%), at $1,755.50 per troy ounce. Gold has recorded further gains today on the back of news that the German economy grew by just 0.1% in the second quarter – a sharp slowdown on growth figures for the previous quarter of 1.3%.

    This news is a serious blow for the eurozone, and underlines the extent to which growth cannot be relied upon to pull developed countries out of their debt problems – a point made by Tangent Capital’s James Rickards in this interview with CNBC. (James Turk’s interview with Mr Rickards, recorded at the GATA conference in London at the beginning of the month, will be published on the GoldMoney website shortly.)

    In similar vein, World Bank president Robert Zoellick warned in Sydney on Sunday that events in Europe and America over the last few weeks have pushed the global economy into “a new danger zone”. Unless politicians “get ahead of the problem, you’ll see the lack of confidence spread”, commented Zoellick.

    Rising gold prices are of course one signal that confidence is falling. Gold prices are also likely to receive a boost from the news that the Swiss government is considering pegging its currency to the euro. Any efforts to suppress the value of the Swiss franc would encourage more safe-haven gold buying by members of the investment community.

    The Swiss authorities have become more and more concerned about the surge in the value of the franc in recent weeks, and major Swiss exporters such as Nestle have seen their profits hammered by the strong franc. It seems even the Swiss cannot remain neutral in the currency war.

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