STAFF NEWS & ANALYSIS
Gold Hits Record High in Euros, Sterling
By Staff News & Analysis - March 03, 2010

Gold rallied to a six-week high in dollar terms and hit record highs versus sterling and the euro on Tuesday, as uncertainty about Greece's debt and Britain's politics lifted demand for bullion as a hard asset. Euro-denominated gold hit a record high of 836.72 euros an ounce, up from 823.66 euros late on Monday, while gold priced in sterling touched a record 759.86 pounds an ounce, up from 744.85 pounds. "Gold denominated in euros has definitely outperformed the drop in euro-dollar by almost 1 percent in the last 10 days," said Mitsubishi Corp precious metals strategist Tom Kendall. "That does reflect some nervousness about stability of sovereign debt, and stability of the euro itself." – Reuters

Dominant Social Theme: Don't look now …

Free-Market Analysis: We are not surprised that gold keeps climbing (silver too). We anticipated a powerful upwards push from money metals way back in 2001-2002 when it became clear that the business cycle had turned and that the 2000s would be a decade of increasing fiat-money chaos. Indeed it has been. We were not alone, of course. Plenty of free-market-oriented observers understood where the West's economy was headed at that juncture. Stock markets were flailing, gold and silver had reached a nadar and there was nowhere to go but up. From our point of view, it is not over yet.

Austrian (free-market) economics make it easy, in a sense, to predict macro investment moves, and even the timing to a degree. Marry free-market economics to analysis of power elite dominant social themes and you pretty much have created a mechanism that allows you to interpret the world with some level of accuracy and comprehension. Simply understand that mercantilist central banks over-print fiat money causing a boom and then eventually a bust. If the bust is big enough, the affected economies will have a great deal of trouble recovering and gold and silver will rise commensurately as people will want to own something of real value and have internalized, once again, the worthlessness of fiat.

Those in control of fiat money – government types and bankers (and the power elite behind them) – make endless PR attempts to discredit gold and silver. In fact, with others, we have expected more power elite pushback directly against rising money metals sooner. It may be the elite has so many challenges on its hands and is so distracted defending so many of its wavering promotions that it simply doesn't have the time or the bandwidth to deal on an institutional level with rising gold and silver prices. Or perhaps those prices simply haven't gone high enough.

There ARE areas of pushback, nonetheless. The mainstream media remains determinedly lukewarm, at best, about precious metals, no matter the price. We couldn't help noticing the lengths that Reuters went to track down the author of an article on gold that claimed the Chinese are going to buy gold from the IMF. Now it is somewhat questionable whether the IMF is actually selling physical gold to all the countries that want to buy gold from it. And there are also questions as to WHY the IMF is selling gold now. But Reuters to our knowledge has never aggressively followed such story leads. Instead it provides us with these insights, excerpted below under the headline, "China buying IMF gold story unfounded: author."

BEIJING (Reuters) – The author of an article that said China had confirmed it would buy 191.3 tons of gold from the International Monetary Fund said on Friday she didn't have official sources for her story. Nobody was available to comment on Friday at China's State Administration of Foreign Exchange, the arm of the central bank overseeing gold reserves.

The unverified report helped push up gold prices by 1 percent on Thursday, though other commodities fell, under pressure from a stronger dollar. Traders cited the talk about China as a significant factor why gold prices clawed higher. China has not said anything officially about plans to buy the IMF gold, but there has been strong speculation because of China's $2 trillion reserves and its announcement last year that it had increased its gold holdings by 454 tons since 2003.

Rough & Polished, a Moscow-based industry website, reported China had "confirmed its decision to acquire 191.3 tons of gold auctioned by the International Monetary Fund," which helped push prices up on Friday. Contacted by Reuters, the author of the Rough and Polished story, Nadezhda Shagrova, who works as a tour guide and journalist in Shanghai, said she did not have any official information to back up her story.

"The source for the story? Well, that's been written about in lots of places. I mean, Xinhua news agency wrote about that and other official Chinese sources, lots of them. Why are you asking?"

We're not sure from Shagrova's comments what to make of the Reuters headline. If Shagrova was relaying reports on the potential for an IMF/gold purchase from China's official Xinhua news agency, well that sounds fairly official to us. But Reuter's zeal to "get it right" in the narrowest sense is par for the course as concerns Western journalism these days when it comes to reporting on gold and silver. Every day, in fact, Reuters reports in excruciating detail on the prices of gold and silver in various currencies. But the reporting is entirely linear. You will almost never stumble on a "big picture" analysis of the gold and silver market from major Western media.

The more in-depth articles on gold and silver – the ones that do get written – may treat the price spikes as aberrant and bound to subside over time. These sorts of articles were more prevalent in the mid-2000s as we recall. Nowadays, articles also tend to lump gold and silver with other commodities, treating prices rises as part of a general upward trend in the prices. We wait for more substantive reporting in vain. We would be most interested in article from Reuters explaining how gold and silver could outperform virtually all other assets over the past decade or so – and why that has not received more attention (certainly compared to equity coverage).

After Thoughts

We don't really expect Reuters or other major media to change their coverage as regards precious metals. But the mainstream is missing one of the biggest stories of the early 21st century in our opinion. There is still time to get on board from a journalistic standpoint. The trend toward higher gold and silver prices continues in our opinion because the fundamentals have not changed. You would think this would be obvious by now. But because it is not, readers interested in gold and silver will continue to turn alternative electronic media for the "bigger picture."

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