Certified Gold Shines on Euro Volatility Posted by James Randolph on May 30, 2012
Certified gold is drawing a lot of attention from investors and making significant technical moves upward in price as the sovereign debt problems in the European Union continue to cause what is commonly referred to as a bloodbath in the currency markets.
Gold has always been the most stable currency, though that history was clouded somewhat in the past thirty years with the advent of paper banking. Now that structured finance is exhibiting so much leveraged trouble, gold has come forward as the most fundamentally sound medium of exchange we have.
The news around Europe is very dire, and this is causing repercussions in other markets that are benefiting gold. Enough talk of Greece leaving the European Monetary Union and the European Union have made the rounds, but there are even greater problems underneath the surface.
Spain is in as bad shape as Greece, and as the twelfth largest economy in the world it should be getting more press. The majority of real estate assets held by Spanish banks are “troubled,” as classified by the Spanish government. The government projects a 1.7 reduction in Spain’s economy this year and the country can’t bring its budget within the guidelines of European Union standards. Also, 51.1 percent of youths under the age of 25 are unemployed in Spain, making a situation ripe for political unrest.
Beyond the trouble we’ve already seen in the European Union, which has helped to bring about some of the strongest demand for gold in the past three years and helped to bring the Euro to lows not seen since July 2010, these difficulties which are still out there and waiting to come to fruition will cause even more drastic lows in the Euro and unprecedented demand in certified gold.
We’re seeing the action now as gold is up around $1,525 and gold futures for August delivery are being traded at $1,556.90, representing the common belief that gold will grow in value in that time. This is under the overall influence of a strong correction in the gold market, which will persist in this time but is being mitigated by the strength of these other factors.
The troubles in Europe are significant and they will be influencing the gold market for some time. Certified gold as a stable currency and medium of exchange is to be evaluated very carefully in this market, given the instability around the world.