Euro Price of Gold Hits Record High As "Debt Woes Spreading" Beyond Greece - Gold Matters

THIS STORY IS STILL DEVELOPING.... AS REALITY STEPS IN...

Monday, May 23, 2011 8:55 AM EDT

Euro Price of Gold Hits Record High As "Debt Woes Spreading" Beyond Greece

By Ben Traynor

The Dollar price to Buy Gold was trading in a tight range around $1510 on Monday morning in London - a 1% gain on the start of last week - as stocks and commodities fell after ratings agencies gave fresh warnings on Eurozone sovereign debt.

In Germany and Spain, meantime governing parties suffered local election defeats.

The Euro lost nearly 1% against the US Dollar in early trade, dropping through the $1.40 mark.

The Gold Price in Euros shot to a new all-time high of €34,746 per kilogram (€1080 per ounce) - 1% above Friday's close. The Euro price to Buy Gold has risen 16% since this time last year.

Silver Prices meanwhile remained flat - trading just under $35 per ounce, virtually unchanged from two weeks ago.

"One problem for the struggling euro zone countries is that they've given up currency flexibility," says Steve Barrow, currency strategist at Standard Bank. "Without the ability to lower interest rates or ease fiscal policy, the inability to devalue makes things tough."

"The week is starting in a decidedly fearful mode, with the spillover from Friday's concerns about Greek debt restructuring still dominating markets," Société Générale's head of foreign-exchange strategy Kit Juckes.

The yield on Greek sovereign debt set a new all-time high of 17% on Monday morning.

"Greece risks a sovereign default," warned French finance minister Christine Lagarde - favorite to be the next head of the International Monetary Fund (IMF) - warned on Friday. "Finance ministers have expressed strong doubts about [Greece's] sluggish progress."

"The Euro is likely to search for the bottom this week as Greek debt woes appear to be spreading to other countries," reckons Mizuho Trust and Banking trader Yoshio Yoshida.

"If the crisis starts to involve other nations beyond Greece, then we could see gold heading to a new record high," Ong Yi Ling, Singapore-based investment analyst at Phillip Futures told Reuters.

Ratings agency Fitch cut its rating on Greek sovereign debt by three grades on Friday, to BB+ to B+. On the same day, Standard & Poor's changed its outlook for Italy's debt from stable to negative, citing "potential political gridlock" and "weak" growth prospects.

Over in Spain, meantime, early results show the ruling left-wing Socialist party is heading for heavy losses in Sunday's regional elections, while tens of thousands continue to pack city streets across the country to protest against unemployment. The opposition Popular party looks to have gained 37.5% of the vote - 10% more than the Socialists.

"Should [Spain] be under severe stress, the capacity of Europe to deal with it would be put in question," says Laurent Bilke, senior economist at Nomura. "Rather than the local elections, it is more the resemblance of Madrid's Plaza de la Puerta del Sol to Cairo's Tahrir Square which is disturbing for the markets."

German chancellor Angela Merkel's party also suffered a local election defeat at the weekend, with the center-right Christian Democratic Union party finishing behind the Greens in Bremen - the first time this has happened in a state election.

Euro Price of Gold Hits Record High As "Debt Woes Spreading" Beyond Greece - Gold Matters

The MasterMetals Blog

Jim Rogers: Dollar will be debased; gold and silver to hit new highs | 05 April 2011 | www.commodityonline.com

below are some excerpts from Jim Rogers interview:

Dollar will be debased; gold and silver to hit new highs

Chinese economy:

There is some overheating and inflation

setback in urban, coastal real estate is under way

China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.

Europe:

I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt.

Following is an interview that The Daily Bell had with Jim Rogers:

Jim Rogers: Dollar will be debased; gold and silver to hit new highs
05 April 2011 | www.commodityonline.com

Daily Bell: We've interviewed you before. Thanks for spending some time with us once again. Let's jump right in. What do you think of the Chinese economy these days?

Jim Rogers: There is some overheating and inflation, which they are wisely trying to cool – especially in urban, coastal real estate. They have huge reserves so will suffer less than others in any coming downturn.

Daily Bell: Is price inflation more or less of a problem?

Jim Rogers: More. At least they acknowledge inflation and are attacking it. Some countries still try denying there is inflation worldwide. The US is even pouring gasoline on these inflationary trends with more money printing instead of trying to extinguish the problem.

Daily Bell: Is China headed for a setback as you suggested last time we spoke?

Jim Rogers: Did I say a setback or a setback in real estate speculation? I think you will find it was the latter. Yes, the setback in urban, coastal real estate is under way.

Daily Bell: They are allowing the yuan to float upward. Good move?

Jim Rogers: Yes, but I would make it freely convertible faster than they are.

Daily Bell: Will that squeeze price inflation?

Jim Rogers: It will help.

Daily Bell: Why so many empty cities and malls in China? Does the government have plans to move rural folk into cities en masse?

Jim Rogers: That is a bit exaggerated. China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.

Daily Bell: Is such centralized planning good for the economy?

Jim Rogers: No. Centralized planning is rarely, if ever, good for the economy. But the kind of construction you are describing is at the provincial level – not the national level.

Daily Bell: The Chinese government is worried about unrest given what is occurring in the Middle East. Should they be?

Jim Rogers: We all should be. There is going to be more social unrest worldwide including the US. More governments will fall. More countries will fail.

Daily Bell: Are they still on track to be the world's biggest economy over the next decade?

Jim Rogers: Perhaps not that soon, but eventually.

Daily Bell: Any thoughts on Japan? Why haven't they been able to get the economy moving after 30 years? Will the earthquake finally jump-start the economy or is that an erroneous application of the broken-windows fallacy?

Jim Rogers: It has been 20 years. They refused to let people fail and go bankrupt. They constantly propped up zombie companies. The earthquake will help some sectors for a while, but there are serious demographic and debt problems down the road.

Daily Bell: The Japanese were going to buy PIGS bonds. What will happen now? Does that only leave China?

Jim Rogers: Obviously the Japanese have other things on their mind right now. I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt. The thing that the world needs is for somebody to acknowledge reality and start taking haircuts.