News Header

 

Analysts Comment on Currencies and Uncertainty

Release Date: 
Monday, August 15, 2011

Several analysts and bankers expect continued support for gold prices from ongoing global economic uncertainty along with related currency developments. Weak U.S. consumer confidence numbers on Friday added to concerns of a fading U.S. recovery while the European debt crisis remains in focus. U.S. economic data, including the Consumer Price Index numbers and initial jobless claims data, are due on Thursday.

The head of the World Bank, Morgan Stanley, MF Global, UBS and Commerzbank provided their commentary. World Bank Chief Robert Zoellick said on Sunday the loss of market confidence in economic leadership in the United States and Europe, coupled with a fragile economic recovery, have pushed markets into a new danger zone. He said uncertainty about the role of currencies was driving financial markets towards the Australian dollar, the Swiss franc and gold.

"Uncertainty in financial markets, whether from the growth outlook or the ongoing sovereign debt crisis, is expected to remain a benefit to perceived safe-haven commodity assets, of which we believe gold is the stand-out exposure," said Morgan Stanley in a note.

"There are some further data points this week out of the United States later ... we have to wait and see how that data will come in. If it disappoints, that might be a reason why the gold price goes up again," he added. "(And) the debt crisis in the euro zone is far from over," said Commerzbank analyst Daniel Briesemann.

Speculation that the Swiss government may peg its currency to the euro could benefit gold prices. Though the currency has traded at record highs against the dollar and euro in recent weeks, Swiss authorities are concerned that the high exchange rates will pressure domestic growth and are considering introducing a fixed-exchange rate with the euro to reduce the threat to expansion.

"Any type of changes in currency dynamics causes people to get into the yellow currency-gold," said Adam Klopfenstein, a strategist with MF Global. With the upside for haven currencies such as the Swiss franc and the yen capped by possible intervention, "redirection of flows in favor of gold is likely to persist," said UBS precious metals strategist Edel Tully.

(Sources: "Gold Eases As Traders Watch Equities, Europe," Wall Street Journal, August 15, 2011; "Gold continues retreat," Financial Times, August 15, 2011; "PRECIOUS-Gold extends losses as stock markets recover," Reuters, August, 15, 2011)

News Footer

 

†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.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

To receive free information package on gold and precious metals investing, call Goldline at 1-800-963-9798.