Gold at 1-mo. high; GFMS sees $2,000+ gold
Source: American Gold Exchange
-- Gold gained again today, rallying to its highest price in more than four weeks as investors continued to seek refuge from the deepening eurozone debt crisis and growing certainty of Greek default. Also driving gold higher was better-than-expected news that China's growth rate, while softening, remains strong at 8.9%. This news prompted a rally in stocks and commodities, and weakened the dollar as investors sought out riskier assets that could outpace inflation and currency devaluation.
At the Comex close: February gold gained $24.80 to $1,655.60; March silver rose 61 cents to $30.14; April platinum gained $39.90 to $1,528.70; March palladium rose $20.45 to $655.50 an ounce.
Both S&P and Fitch stated their stark belief today that Greek default is inevitable. "Greece is insolvent and probably won’t be able to honor a bond payment in March," declared Fitch Ratings Managing Director Edward Parker. "Greece will default very shortly," conceded Moritz Kraemer, head of S&P's sovereign ratings unit. The fallout for the euro will no doubt be profound. Borrowing by the ECB to finance the second round of its Long Term Refinance Operation (LTRO) in late February is expected to soar. Even before these statements, LTRO borrowing was expected to exceed a whopping 500 billion euros," according to the UK Telegraph. With Greek default on the table, Credit Suisse says the amount could be more like 1 trillion euros or even much higher. We'd expect this kind of liquidity injection to produce much higher gold prices this year, and almost ensure additional easing by the Fed.
Even without Greek default, bullish reports for gold in 2012 keep flowing in. Today, Thomson Reuters GFMS, a leading global precious metals consultancy, published its annual gold survey. GFMS predicts gold prices in excess of $2,000 an ounce later this year—and substantially higher if the U.S adopts a third round of quantitative easing. The survey determined that global investment in gold surged by 20% last year to an all-time high of $80 billion, primarily because of physical buying of gold coins and bars by small investors. Gold bar sales increased by more than 33% to nearly 1,200 metric tonnes, with investors in Germany, Switzerland, Austria, and China buying the most. Estimated central bank purchases added at least another 470 tonnes, a trend that should grow in 2012 and beyond as governments diversify their reserves away from dollar holdings.