GOLD HIGHER ON EURO WOES
June 01, 2010
"The primal forces of economics, supply and demand, are arguing for an upward revaluation of gold" states billionaire and chairman of the Tigris Financial Group, Thomas Kaplan, in a recent Forbes commentary.
Dr. Kaplan explains that basic rules of supply and demand are driving gold higher as investor demand for currency diversification and capital appreciation combined with increased demand from central banks such as China and India create a "perfect storm" for gold. "I would argue that any time the consumers of the two largest countries in the world are competing for a scarce asset, the rest of us should consider owning it."
Fueled by a number of key factors, including ongoing euro concerns, gold spot and gold futures prices moved higher on the first trading day in June. The euro hit new lows as Spain’s bond rating was downgraded on Friday, May 28, and the European Central Bank warned the following Monday of additional future write-downs for euro-zone lenders.
"We're still trying to price in the euro problems," said Frank Lesh, a broker and analyst at FuturePath Trading in Chicago. Mr. Lesh added that investors are buying gold as an alternative to currencies.
Gold is up almost 12% as of June 1, 2010 but is still 34% below its all time inflation-adjusted high as it continues to rise on "safe-haven" buying from investors. (06/01/10, MarketWatch, "Gold futures climb while equities, euro slips")
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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.
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