The gold price reached a new high in dollars for 2010 in the early hours of trading for Monday 3rd May. The spot price reached $1,182.95 per ounce, its highest this year. It also reached new record highs in pounds, and euros. Yesterday's Greek aid plan did little to strengthen support for the euro and currencies in general.
The long, drawn out handling of the Greek crisis has captured the growing unrest and disillusionment of the public and investors. But whilst Greece has been in the papers of late, it's not alone in its predicament. It is the first strike for the euro. With Spain and Portugal looming it could be strike two and three... then what happens?
Strikes in Greece look certain to continue as people fail to comprehend why their standard of living must change. When the people avoid taxes and officials flout rules and twist regulations for their own personal benefit, the end outcome is a corrupt society in which responsibilities and promises are worth nothing.
Against this backdrop gold has steadily been gaining ground in recent weeks, and in April alone the yellow metal rose by 6%, with many analysts predicting the $1,200 per ounce to be breached sometime next week.
Britain's future hangs in the balance
In Britain the record gold price represents a sliding pound and a sliding belief that Britain has a political party capable of coming into power and tackling the economical woes Britain is experiencing. What disappointing alternatives for government Britain has available. We've had three live televised debates and we've still not heard committed actions on how they intend to tackle the deficits this country has hung itself with.
With just weeks away from what is one of the most crucial elections this country has ever experienced the public is left disillusioned and without options. It was up to David Cameron to step up to the plate and lead a credible alternative, something which looked likely only three months ago. But public opinion has turned on the Conservative leader as the outsider, Nick Clegg, has gained popular support. The conservatives' majority has dwindled as we lead up to the final few weeks (click here to see the polls and how they've changed here).
Whoever takes control taxes will of course go up. The government that takes the reins will have to make unpopular decisions just as they are being made in Greece. The boom generation is followed by the bust generation, but what comes next? The buggered?
Hedging against fiat currencies, gold is still seen as the best alternative - a well respected source of value and globally recognised. A currency in its own right, one that is restricted in its supply, and therefore not so easily manipulated by governments.
As the chart below shows, gold prices today are looking bullish in all major currencies.
Source: Plexus Asset Management (based on data from I-Net Bridge).
It's important to note that the recent highs have had very little to do with the dollar. Indeed the dollar index has stayed relatively balanced for the past few weeks.
If the dollar were to slide, which is a possibility/probability given the perilous financial positions of some of its states (see an article by the NY Times on 29th March 2010 here) and the staggering US national debt, then this gold rally could really take off.
With fiscal deficits and national debt problems not restricted to just Europe, the case for owning gold as part of your portfolio is compelling.
Disclosure: No positions