Friday, July 29, 2011

Gold Rallies, "Credibility Downgrade" Hits "Irresponsible" Washington



London Gold Market Report
from Ben Traynor
Friday 29 July, 08:30 EDT


Gold Rallies, "Credibility Downgrade" Hits "Irresponsible" Washington

THE U.S. DOLLAR gold price climbed to $1617 an ounce Friday morning London time – 0.7% off Wednesday's all-time high – as stocks and commodities fell following the decision to cancel a vote on proposals to cut the US deficit.

Heading into the weekend, the gold price was looking at a 1% weekly gain by Friday lunchtime.

The silver price hit $39.83 per ounce – a 0.6% down on last week's close – before easing back around midday.

"If a deal to raise the US debt ceiling is not in place [within a week], federal agencies will be effectively bankrupt," says French investment bank Natixis. 

"Furthermore, fears of a downgrade in the AAA rating of the US are also helping gold, and the country has already received a credibility downgrade in the eye of many investors."

"Investor reluctance to wait until Monday for a resolution that may not come could see gold climb again after a relatively steady day yesterday," adds one gold bullion dealer here in London.

The vote on speaker John Boehner's proposals to reduce the US deficit – due to go before the House of Representatives – was cancelled on Thursday after lobbyists failed to drum up enough support from Boehner's fellow Republicans.

Boehner reportedly told Republican holdouts to "get your ass in line" on Wednesday.

"I didn't come here to go along to get along," responded Republican Congressman Jason Chaffetz. 
"These arguments of 'get behind me' aren't persuasive."

"I'd like something systemic that transcends election cycles," added Republican Congressman Trey Gowdy.

"Like a balanced budget amendment."

Boehner's proposal would raise the debt ceiling by around $900 billion, meaning the US Treasury would likely hit it around December this year.

"No Democrat will vote for a short-term Band-Aid that would put our economy at risk," says Senate majority leader, Democrat Harry Reid.

The White House has also said it would veto Boehner's plan if it got through the Senate.

Beijing's state-run Xinhua news agency said on Friday that the US has been "kidnapped" by "dangerously irresponsible" politicians.

China is meantime poised to overtake India as the world's largest gold bullion consumer, according to the chief executive of world's second largest Gold Mining firm Goldcorp.

Here in Europe, ratings agency Moody's placed Spain on review for possible downgrade on Friday. 

The decision should "return focus to the not entirely settled Eurozone debt situation," says Marc Ground, commodities strategist at Standard Bank.

Spanish prime minister Jose Zapatero announced shortly afterwards that he was calling early elections, "to project political and economic certainty for the next few months".

The elections will take place on November 20.

Eurozone inflation meantime fell to 2.5% this month, compared to 2.7% in June, according to data released Friday by Eurostat, the European Union's statistics body.

By contrast, inflation in the Eurozone's biggest economy, Germany, rose this month – up to 2.4%, compared to 2.3% in June –data published on Thursday show.

The lower-than-expected Eurozone figure gives the European Central Bank " more room for maneuver given signs of a sharper than expected slowdown in economic growth," says ABN Amro economist Nick Kounis.

"Essentially, a more favorable inflation evolution could make it easier for the ECB to take a break from rate hikes if the downside risks to the outlook were to intensify," he adds, citing sovereign debt problems on both sides of the Atlantic.

"Eurostat's methodology for seasonal factors has [however] changed from January," points out Luigi Speranza, economist at BNP Paribas.

"This, we believe, is the main cause underlying the sharp slowdown in [consumer price] inflation."

In Switzerland, meantime, "the appreciation of the Swiss Franc against all major investment currencies resulted in substantial valuation losses" in the first half of the year, the Swiss National Bank said Friday. 

The SNB lost CHF9.9 billion in transactions designed to control the Swiss Franc's rising value on currency markets. The Swiss Franc is regarded by many investors as a 'safe haven' currency.

The Swiss Franc gold price fell 4.8% over the first half of 2011 – while the US Dollar gold price rose 6.1% over the same period.

"Gold is denominated in a unit which is non-constant," points out a note from Citigroup today, adding that the US Dollar "has tended to decline in value thereby artificially inflating the metal's nominal price".

"Given the historical role of gold as a storage of wealth, perceived devaluation in the purchasing power of fiat currencies translates into demand for the what is essentially the ultimate global reserve currency."

Ben Traynor



Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.





Barclays Capital comments on the situation in the US

Analysts at Barclays Capital note that situation at the FX market is going to be more complicated than the one at the stock market.

While in case of the worst outcome in the US equities just pick up the bad news, the currency markets will face 2 impacts: the big negative shock to the US in particular and the global risk shock. The former to some extent offsets the latter when it comes to the overall influence on US dollar. 

The bank still thinks that the liquidity of American market and the dollar’s safe haven status will play its role.

The specialists believe that US authorities will reach a short-term deal before August 2 as it’s impossible to find long-term solutions ahead of that. The long-term deal is very important though, firstly, because of the potential S&P downgrade and, secondly, as this is a very serious issue and if US doesn’t get its fiscal house in order, the global economy will suffer.

BarCap says that further out on the time horizon, fiscal tightening will weigh on growth and weaken US currency as the Fed’s monetary policy will remain looser for longer than the market is currently expecting.

According to the bank, Barack Obama and the Congress speaker John Boehner aren’t willing to compromise now putting the decision off to the last moments as each of them hopes that the other will back down fist.

The economists believe that it’s not the time to get too risky and adventurous at the forex market. Barclays Capital says that at the moment the most attractive currency is yen as it allows enjoying the classic risk-off trade.

published by FBS Holdings © 2011




Royal Bank of Scotland sell EUR/AUD and EUR/NZD

While the market’s attention was focused on the development of US debt debates, there’s a good chance to benefit from trading Australian and New Zealand’s dollars.

Strategists at Royal Bank of Scotland believe that both nations are likely to lift up the interest rates rather soon. The specialists note that there was a flow of encouraging economic data so far. That includes strong growth and confidence figures from New Zealand and higher than expected CPI in Australia. In addition, Aussie and kiwi will be driven by the demand for rising neighbouring Asian assets. The greenback, on the other hand, has little upward potential as there aren’t many positive factors to encourage it.

RBS also thinks that the problems in the euro area are going to escalate as the regions will be struggling to implement the second bailout for Greece. It will be very difficult for Europe to regain the market’s confidence as it may be seen from the rising Italian sovereign bonds. 

The bank advises investors to sell EUR/AUD at 1.3010 stopping above on a 2-day close above 1.3500 and targeting 1.2000 by the first quarter of 2012. RBS recommend as well going short on EUR/NZD at 1.6500 stopping above on a 2-day close above 1.7000 and targeting 1.5000 by the first quarter of next year.

weekly euraud 11-33

Chart. Weekly EUR/AUD

published by FBS Holdings © 2011



AUD/USD Elliott Wave count and Fibonacci levels - 29 July 2011

AUD/USD is moving within wave C of long term uptrend - from 1.0561 (colored light green in the chart). At the moment this wave consists of five subwaves - colored red in the chart. Wave 5 is over and now a corrective wave is developing.

The targets of the downmove are Fibonacci retracements of 1.0561-1.1079, and expansions off 1.1079-1.1002-1.1074.

Supports:

- 1.0949 = expanded objective point (XOP)
- 1.0881 = .382 retracement
- 1.0872 = super expanded objective point (SXOP)
- 1.0820 = .50 ret
- 1.0759 = .618 ret

If the price reverses to the upside the immediate resistances will be Fibonacci expansions off 1.0390-1.0797-1.0561, 1.0561-1.0772-1.0694, 1.0694-1.0873-1.0795.

Resistances:

- 1.1085 = XOP
- 1.1220 = XOP
- 1.1246 = SXOP
- 1.1264 = SXOP


Overbought/Oversold

Assuming that the medium term trend is up it's preferable to try long positions when the Detrended Oscillator goes below the zero level (current prices) or gets into the oversold area (10-20 pips below the current prices).

Performed by Roman Molodiashin, Analytical expert

InstaForex Companies Group © 2007-2011



Moody's places Spain's Aa2 ratings on review for possible downgrade

Previous session overview
Major currency pairs are little changed Friday, while investors puzzle out whether to risk any major plays before the weekend, when U.S. politicians are likely to hash out a debt agreement.

The dollar fell in Asia Friday after the U.S. House cancelled a vote on Speaker John Boehner's debt ceiling plan, adding to speculation the risk of a sovereign downgrade is rising even if a last-minute deal is reached by a Tuesday deadline to avoid default.

The greenback dropped to a fresh more than four-month low against the yen at JPY77.48 after House Majority Whip Kevin McCarthy said the House would not vote as scheduled Thursday evening in D.C., as House Republicans were unable to gain enough support within their ranks to secure passage of the bill. 

At 0350 GMT, the dollar was at JPY77.52 from JPY77.65 Thursday in New York. The ICE Dollar Index was at 74.100 from 74.117. The euro was at USD1.434 from USD1.4330, and JPY111.18 from JPY111.29.

The Pound outperformed most other risk currencies finding support under USD1.6300 and EURGBP falling to GBP0.8750. CBI Realized Sales at -5 vs. 0 forecast UK economy struggling to gain traction.

The Australian dollar was weaker Friday as investors reacted to news of further delays in Washington hampering a successful resolution to the U.S. debt ceiling debate ahead of Tuesday's deadline. At 0600 GMT, the Australian dollar was at USD1.0952, down slightly from USD1.1037 late Thursday. Against the Japanese yen, the Australian dollar was at JPY84.89, down slightly from JPY85.81.
Market expectation
Dealers said the continued political discord in the U.S. may tarnish the dollar's long-time status as the safest place to park funds in turbulent times. The Swiss franc and the yen, currencies of countries that both have large current account surpluses, have benefited on this trend. 

The Bank of Japan is expected to keep interest rates at near-zero levels for the foreseeable future, which should decrease the appeal of holding the unit. 

The EUR/USD prints a fresh intraday low at USD1.4281 after Moody's places Spain's Aa2 ratings on review for possible downgrade; the move highlights the continued risk of debt woe contagion in the euro-zone, dealers say. Any breach of USD1.4250 could prompt further sell, bringing a fall below USD1.4100 into view, say dealers. But the pair is likely to remain vulnerable to sharp sways, as investors react to headlines on debt problems on both sides of the Atlantic.

European stocks are expected to start deep in negative territory Friday after negotiations on the U.S. debt ceiling hit another brick wall as U.S. politicians delayed their vote on a debt proposal by House of Representatives speaker John Boehner.





Thursday, July 28, 2011

Bayonets and Gold

The history of fiat money has always been one of failure - every fiat currency since the Romans started diluting the silver content of their denarius has ended in devaluation and eventual collapse of  both the currency and of that particular economy. Most paper money economies downfall  can be linked to the costs of financing out of control military growth and its wars.

For the very first time in our history, all money, all currencies, are now fiat - the US dollar use to be gold backed and it was the rock all the worlds currencies were anchored to - when the US dollar became fiat, all the worlds currencies became fiat. 

According to House Speaker John Boehner and Senate majority leader Harry Reid the budget compromise reached between the White House and Congress in April of this year included an "historic amount of cuts". President Obama gushed it was "the largest annual spending cut in our history”. 

Mainstream media called the cuts sweeping and across-the-board. 

Unfortunately not a single penny of the spending cuts will come from the Pentagon's coffers.

Defense spending in 2011 is actually going to increase, by a reported $5 billion over 2010 levels to $513 billion. The $513B doesn't actually include the cost of ongoing overseas contingency operations, these would be the wars in Iraq and Afghanistan (the Fiscal Year budget requests for US military spending do not include combat figures which are supplemental requests that Congress approves separately) – if those costs were included U.S. military spending in 2011 will exceed $700 billion. 

Also not included, even in the $700B, are nuclear weapons spending, black ops, interest on the defense portion of the debt and ongoing military obligations to veterans. The budget for nuclear weapons falls under the Department of Energy, other military expenses - care for veterans, health care, military training, aid and secret operations – are put under other departments or are accounted for separately.

The US numbers are eye opening - they amount to more than half of all government discretionary spending and represent, at the very least, an astounding 43% of total military spending on the planet. 


Neither Obama's 2012 budget proposal nor Representative Paul Ryan's "Path to Prosperity" signal a major decrease in military spending - Ryan's budget projection calls for nearly $8 trillion in military spending over the next decade.

“Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes … known instruments for bringing the many under the domination of the few.… No nation could preserve its freedom in the midst of continual warfare.” James Madison, Political Observations, 1795

 The Chinese love their gold…

Chinese appetite for gold has increased rapidly over the past few years. In March 2010, we predicted that gold demand in China would double by 2020, however, we believe that this doubling may in fact be achieved sooner. Increasing prosperity in the world’s most populous country coupled with their high affinity for gold will serve to drive demand in the long-term. Near term inflationary expectations are likely to support the investment case for gold.” Albert Cheng, Managing Director, Far East at the World Gold Council

So too do Indians…

Gold demand in India, the world’s largest user of the bullion, may increase to more than 1,200 metric tons by 2020 as economic growth boosts incomes and household savings. Indian households hold more than 18,000 tons of gold, the largest stockpile of bullion in the world. Gold purchases by India accounted for 32 percent of total global sales in 2010.” World 

Gold Council

India’s total demand exceeded China’s by 383.5 tons in 2011. GFMS Ltd. and INTL FCStone said in March that Chinese consumption of gold may soon climb to rival that of India. Could it be that the Chinese, and Indians, long ago caught onto something we here in the west are just now slowly figuring out?
According to the World Gold Council investor demand for gold ownership -  in the form of bars, coins and jewelry - is climbing, while at the same time production at existing mines is grinding down, re-cycled gold sales are dropping and central banks are increasingly gold buyers not sellers:
  • Global gold demand in the first quarter of 2011 totaled 981.3 tonnes (US$43.7bn), up 11% year-on-year from 881.0 tonnes (US$31.4bn) in the first quarter of 2010. The increase was largely attributed to a widespread rise in demand for bars and coins and increased jewelry demand - demand for physical bars and coins was up 52% at 366.4 tonnes while jewelry demand in the first quarter of 2011 registered a gain of 7% year-on-year to reach 556.9 tonnes. India and China are the two largest markets for gold jewelry and together accounted for 349.1 tonnes of gold jewelry demand or 63% of the total - US$16bn. China’s jewelry demand reached a new quarterly record of 142.9 tonnes, up 21%, from 118.2 tonnes
  • In the first quarter of 2011 investment demand grew by 26% to 310.5 tonnes
  • ETFs and other similar products witnessed net outflows of 56 tonnes (mostly concentrated in January). The collective volume of gold held by these products at the end of the quarter was still over 2,100 tonnes
  • In Q1 2011, gold supply declined by 4% year-on-year to 872.2 tonnes from 912.1 tonnes in the first quarter of 2010 - this against an increase in mine production of 44 tonnes (a growth rate of 7%)
  • The decline in total supply was because of two reasons: firstly recycled gold was down 6% on year earlier levels to 347.5 tonnes from 369.3 tonnes and secondly a sharp increase in net purchasing by the official sector - central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total of net purchases during the first three quarters of 2010 

ABN Amro Bank, VM Group and Haliburton Mineral Services recently published a report providing details on rising gold mining production costs. Cash costs include:
  • Direct mining and processing expenses
  • Other onsite charges
  • Third party smelting and refining charges
  • Royalties and taxes net of by-product credits
In the first quarter of 2011, the average cash cost of production rose from $609 oz to $620 oz. 

While production costs were rising, so too were margins - from $758 oz to $767oz. 

The Gold Demand Trends report for Q1 2011 states demand for gold will be driven by a number of key factors:

·         Continued uncertainty over the US economy and the dollar
·         Ongoing European sovereign debt concerns
·         Global inflationary pressures
·         Continued tensions in the Middle East and North Africa
·         Chinese and Indian jewelry demand
·         Net purchasing by central banks

Conclusion



If I was looking for superior investment vehicles to take advantage of what I think I know regarding the future for precious metals I’d be looking at junior producers, near term producers and companies that are in the post discovery resource definition stage with the occasional green field exploration play thrown into the mix.

I believe junior resource companies offer the greatest leverage to increased demand and rising prices for commodities. There is also a very real and increasing trend for Mergers and Acquisitions (M&A) in one of the few bright spots available for investors - resources.

Juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines. They already own, and find, what the world’s larger mining companies need to replace reserves and grow their asset base.

The following factors will drive the growing M&A trend:

·      Consolidation to achieve economies of scale and pricing power
·      Scarcity of large producing assets
·      High demand in industrialized nations for metals and minerals
·      V shaped recoveries in developing countries
·      Expansion into new geographies
·      Diversification of resource bases
·      Looser bank lending
·      Higher commodity prices and better company cost management = larger operating cash flow

Using history as our guide we know that the greatest leverage to precious metals, the most profitable rewarding way to get involved in precious metals, is to own the shares of junior precious metal companies - our gold junior resource companies, the same ones who today are so oversold and undervalued, are the present owners of the world’s future gold supply.

Gold miners are showing some pretty healthy profits and their coffers are overflowing with cash. Investors are starting to pay attention. Ahead of the herd investors realize the attention being paid to the world’s major and few remaining mid-tier miners will soon trickle down to the juniors developing precious metal projects. 

Junior gold stocks should be on every investors radar screen. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills
www.aheadoftheherd.com

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report. 

Richard Mills does not own shares of any companies mentioned in this report.



US Advanced GDP (Gross Domestic Product) Release - 29 July 2011

Here is the forecast for the US Advanced GDP q/q :
 
8:30am (NY Time) US Advance GDP Q/Q

Forecast 1.6% Previous 1.9%
 
ACTION: USD/JPY BUY 2.0% / EUR/USD BUY 1.2%

The Trade Plan
 
We are looking for a deviation between 0.3~0.4% from the forecasted figure of 1.6%. Therefore if we get a 2.0% on the second quarter GDP, it would be US Dollar positive. We will BUY USD/JPY. However, if we get a 1.2% release or worse, then we would be BUYING EURUSD. 

We´ll be looking to trade this release based on my Retracement Trading Method; since this is a high impact release, strong market volatility is expected immediately after the release.

We´ll be trading this release using an after-news retracement method.
 
The Market
 
According to a medium forecast of 69 economists surveyed by Bloomberg agree that today’s Adv. GDP for Q2 2011 is going to be 1.6%, which is a drop from previous 1.9% of release.
With limited job growth and rather disappointing Retail Sales figure at 0.8%, which counts as 70% of the GDP, and because this figure is the lowest sales figure since 2009, there are very little speculation that today’s GDP will surprise to the upside.

With Fed Bernanke still reiterating to maintain all options open and the recent debt ceiling debate threatening the sovereign rating of the USD, today’s GDP may provide support for the USD if we get a positive surprise, or send USD down even further into capitulation territory if we get a much worse than expected figure.

Additional Thoughts
 
With Adv. GDP being the first GDP release of the three, it is usually the most volatile GDP release with the highest potential of a surprise number. Because the impact of GDP on future monetary policy, this event has the potential of changing both the long-term and short-term trend of USD. It´s definitely an event worth trading.

DEFINITION:

"GDP, which is defined (from wikipedia) as "the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time." GDP number has a direct effect on the Interest rate of the currency, it is one of the news indicators that affects FOMC´s decision directly."

Thanks,






Traders Contest Winner - Dukascopy Bank SA - June 2011


HSBC: USD/JPY may decline to 70 yen

Currency strategists at HSBC believe that no matter how develops the situation in the US, investors will benefit from buying yen.

In other words, the specialists expect Japanese currency to gain versus its American counterpart in both cases: if the market’s risk aversion keeps escalating and if the debt ceiling is finally lifted. In their view, it isn’t clear is the current environment negative only for the greenback or we see the general risk sentiment deterioration.

HSBC underlines that yen has added only 4.5% this year and is likely to start catching up better performing G10 currencies. According to the analysts, the pair USD/JPY may fall to 72 and probably to 70 yen.

daily usdjpy 14-36

 
Chart. Daily USD/JPY

published by FBS Holdings © 2011


US Reaching "End of Empire", Investors Have "No Safe Havens Left"

London Gold Market Report
from Ben Traynor
Thursday 28 July, 08:30 EDT


Gold Choppy, US Reaching "End of Empire", Investors Have "No Safe Havens Left"

THE PRICE to buy gold in US Dollars oscillated Thursday morning London time – soaring to just under $1620 an ounce before easing back – while stocks fell and commodities were mixed as Washington prepared for a postponed debt ceiling vote.

On Wednesday gold price set a new intraday high in Dollar terms of $1628 per ounce in New York trade – a jump of 1.75% from last Friday's close.

The price to buy silver meantime hovered around $40.28 per ounce – up 0.5% on the week.

The Euro price to buy gold meantime rose steadily throughout Thursday morning to hit €1133 per ounce – a 1.6% gain for the week so far.

"The so-called 'ugly competition' between the Dollar and the Euro just seems to get uglier all the time," says Steve Barrow, currency analyst at Standard Bank.

"The debt ceiling still looms large in the markets with gold finding support from the dysfunctional discussions," adds one London bullion dealer.

The US House of Representatives is due to vote on speaker John Boehner's deficit cutting plan on Thursday – after it was postponed yesterday when the Congressional Budget Office found it did not deliver the claimed spending cuts.

Many of Boehner's fellow Republicans have expressed dissatisfaction that the plan does not go far enough, while Democrat Harry Reid, Senate majority leader, says it will be "dead on arrival".

Nevertheless, Reid says he may incorporate elements of Boehner's plan into his own rival proposal. 
The US Treasury has said it expects to hit its $14.3 trillion borrowing limit next Tuesday.

"Should a default occur gold will be vulnerable to a sharp correction as investors cut their risk exposure and use gold to generate cash," warns Swiss precious metals group MKS.

"But as seen previously once the initial sell-off is complete there are likely to be further upside gains."

Even if Congress agrees to raise the debt ceiling "America's problems would not be solved," said Germany's finance minister Wolfgang Schaeuble on Thursday.

"The main issue is overly high debt and economic prospects... the Americans must find long-term solutions for solid fiscal policy and growth."

One potential sticking point of Boehner's plan is it would only raise the debt ceiling enough to cover a few months of US Treasury borrowing. President Obama has repeatedly said he will not accept any short-term deal.

"The US is experiencing an 'end of empire' moment," says Jim Leaviss, London-based fund manager at M&G Investments.

"The Dollar share of global reserves is likely to fall gradually." 

"Investors worldwide," says Dick Bove, banking analyst at Rochdale Securities, "may actually be horrified that the only safe haven at the minute is short-term Treasuries and bank deposits backed by the FDIC [Federal Deposit Insurance Commission]." 

"The quest is on to find a new global safe haven."

Gold bullion is not an option, Bove says, because "there is not enough of it", while the Swiss Franc won't work either because the Swiss government "needs to stop the inflows...to protect its economy."

Until a new safe haven is found, investors "must protect themselves by remaining liquid," says Bove.

China meantime "will continue to diversify the asset allocation of [its] reserve assets", according to a statement made Thursday by the State Administration of Foreign Exchange.

"We don't pursue large-scale reserves and don't pursue long-term surplus in international balance of payments," added SAFE.

"Some have argued that we should buy oil, buy gold, buy iron ore, or even buy into companies and land," SAFE's director Yi Gang said earlier this year.

"But it is much easier said than done." 

China boasts the world's second-largest private gold bullion demand. Using a significant portion of its $3 trillion plus reserves to buy gold or oil "could push up market prices, which may affect our people's consumption and economic development," SAFE said last week.

Here in Europe, ratings agency Standard & Poor's downgraded Greece again on Wednesday – from CCC to CC.

"Standard & Poor’s has concluded that the proposed restructuring of Greek government debt would amount to a selective default under our rating methodology,’" said a statement from S&P.

"We view the proposed restructuring as a 'distressed exchange' because, based on public statements by European policy makers, it is likely to result in losses for commercial creditors."  

Moody's meanwhile cut its rating for Cyprus by two notches, from A2 to Baa1. Both countries remain on negative outlook.

Over in New York, the volume of gold futures contracts traded on the Comex exchange soared to 423,981 on Wednesday – a 30% jump on the day before, and up 142% compared to Wednesday last week.

Ben Traynor



Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.