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GOLD: Gold Price in Euros Has “Gone Parabolic”


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In 2010 to date, gold prices have gained 13% in dollar terms, 28% in euros and 13% in yen. Indeed, says Alan Demby, executive chairman of the South African Gold Coin Exchange (SAGCE), the gold price in euros has gone parabolic.

He highlights several “fascinating observations” that have recently been emanating from United States sources, pointing out that more often than not, South Africans, being close to the action, sometimes fail to see the wood from the trees. “Not only that, but information we seldom see published here frequently sees the light of day abroad.”

He quotes as an example a statement from The Sovereign Society’s World Currency Watch to the effect that South Africa’s Rand Refinery recently received an order from a German bank for 30 000 Krugerrands, soon followed by an order for 15 000 Krugerrands from another German bank.

Commenting on these orders – the Rand Refinery usually receives orders for no more than 2 000 Krugerrands at a time from European sources – Eric Roseman, editor of Commodity Trend Alert said: “Individuals in Europe are growing alarmed that the European Central Bank (ECB) has deviated from the anti-inflation mantra set forth by the legendary German Bundesbank and, instead, will begin monetising debt or creating paper money to bail out weaker Eurozone countries.”
Roseman went on: “The ECB’s credibility is now in the toilet along with the Fed’s – two of the world’s largest reserve or quasi-reserve currencies.”

He maintained that we were witnessing the beginning of the end of the post-World War II global exchange-rate system; that the exchange-rate mechanism was “out of control, destructive and causing all sorts of chaos for governments, investors and business alike”; and that the end-game would be a “formidable crash, probably a dollar crash”.

Demby says that while Roseman’s remarks could be construed as alarmist, given the current parlous state of the first world’s banking infrastructure, they cannot be entirely discounted.

IN a similar context, he cites the observations of Asset Strategies International’s Rich Checkan: “We’re printing a lot of money, and struggling with a lot of domestic issues. With the floor for gold at about $1 050, the world has sent a signal that it’s OK with four-digit gold. “Over the coming 12 to 16 months, we may see the greatest market ever for gold. People are buying for need, not greed.”

Demby also quotes American coin legend Van Simmons: “I own gold (and some silver) mainly because the global exchange-rate system is not functioning properly, and the balance of power that has shifted from West to East (accelerated since the 2008 crisis) will increasingly demand a replacement for fiat dollars or fiat euro.

“That transition will be violent. That’s why I own gold. Never in the history of the world has economic power shifted peacefully from one dominant nation to another without some sort of conflict or crisis. This time will be no different.

“Also, I do think the consequences of all this printing will result in enormous inflation down the road – staggering inflation.”
Demby agrees with Roseman’s contention that gold is in a secular long-term bull market.

“Those investors who fail to recognise or appreciate the primary trend also fail to understand gold’s role in a post-credit crisis environment of escalating government deficits, central bank debt monetisation and the adverse long-term implications of these policies on paper money’s purchasing power.”

Demby says that The World Gold Council’s recent report that net gold sales by central banks were now at their lowest levels in 20 years had not been fully absorbed. In particular, he emphasises, selling by European central banks has virtually dried up – only two tons have been sold in the past 10 months – in the wake of last September’s renewal of the Central Bank Gold Agreement, which regulates the sales.

Roseman again: “At some point later this year or in early 2011, I think the US economy will double-dip or sputter back into a recession. That’s when we’ll see gold surge to $2 000 an ounce or higher — and very quickly.

“This will probably mark the last time investors will get a chance to buy bullion before the final phase of this bull market takes prices to at least the 1980 inflation-adjusted high of $2 309 an ounce. So, use any short-term pullback as another opportunity to buy gold.”


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