[Vision2020] 7-25-2011: Gold hits fresh record high at $1, 623.49/oz overnight

[Ted Moffett]

During the stock market/banking collapse in 2008-9 I talked with a
Vision2020 participant about financial safe havens for investment in
an economic crisis.  I mentioned that gold was considered a haven by
some investors, but the person I was talking with indicated this was
not a wise investment.  However, given gold in 2008 hit a high around
1010 USD an ounce, and where gold is today, investing in gold in 2008
would today offer a nice return:

Gold prices in 2008:

http://www.kitco.com/scripts/hist_charts/monthly_graphs.plx
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http://news.tradingcharts.com/futures/5/7/162089475.html

By Francesca Freeman

Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Spot gold hit a fresh record high of $1,623.49 a
troy ounce in Europe Monday amid renewed concern over U.S. and
European sovereign debt, and while shifts in macro sentiment are
likely to keep prices choppy in coming weeks, market players expect
entrenched risk aversion to support further gains.

The failure of U.S. congressional leaders to reach an agreement over
raising the nation's debt ceiling over the weekend initially spurred
gold's overnight rally, as investors sought solace in the metal's
perceived safety. And while prices later cooled as some players booked
profits, news that Moody's Investors Service had cut Greece's debt
rating to Ca, a cut above default, energized the gold market once
more.

At 1047 GMT, spot gold traded 1.1% higher at $1,617.53/oz, just short
of earlier highs. Spot silver also gained ground, hitting an 11-week
high of $41.073/oz before trading at $40.813/oz, up 2.0%. Like gold,
silver is often seen as a safe place to park cash in times of economic
insecurity.

"The aura of uncertainty over the ongoing U.S. debt ceiling talks [is]
likely providing a solid floor under price levels," said Morgan
Stanley.

This, combined with concerns over debt contagion in Europe, Chinese
inflation, and generally higher oil prices "will provide adequate
impetus to keep prices at elevated levels," the bank added.

However, with investors' attention locked on sovereign debt issues on
both sides of the Atlantic, prices are likely to be remain volatile in
coming weeks as the wider market mood dictates trading sentiment, said
trade players.

"Things will be erratic from here, given the way prices have leapt,"
said a senior industry participant.

However, while a U.S. debt limit agreement could see prices initially
slip, longer-term demand for so-called safe haven assets should remain
ingrained for the foreseeable future, he added.

"This is not a trade that is attracting a lot of fringe playing," said
the participant. "This is more about people looking for an alternative
financial asset amid a lack of trust for the European and U.S.
governments."

According to weekly data from the Commodity Futures Trading
Commission, the net speculative length of Comex gold futures increased
86.4 tons to 845.7 tons in the week to July 22, the highest level this
year. Additionally, holdings in gold exchanged-traded funds increased
by 19.1 tons to 2,191.7 tons, marking a new end-of-week high for 2011,
according to Standard Bank.

"This enforces our strategic view that investor interest will remain
supportive over the long-term," said Standard Bank analyst Marc
Ground.

-By Francesca Freeman, Dow Jones Newswires; +44 (0)20 7842 9412;
francesca.freeman at dowjones.com

(END) Dow Jones Newswires

07-25-11 0712ET
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Vision2020 Post: Ted Moffett