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Flight to gold sees financial markets struggle

Flight to gold sees financial markets struggle
By NZ Mint head bullion trader Mike O’Kane

Turmoil is good for the price of gold and again financial markets are struggling against a tide of opinion that the Euro bailout package may not succeed.

At USD$1,233 overnight, gold hit its highest price ever and some analysts are predicting USD$1,250 by the weekend. The previous record price of USD$1,227 was when the NZD / USD was around 0.54.

So for Kiwi gold buyers, the relatively high NZD$ rate is helping to offset these record gold prices making it cheaper to buy here than in most countries. As an aside, gold has also hit record highs in Yen, Euro, USD$ and GBP.

Analysis
Overall financial markets globally are struggling as investors move to safe haven investments. This can be seen by the fall in US government bond yields, and the surge in the gold price.

Sovereign risk concerns are still at the forefront of most markets’ concerns, especially in Europe, so instead of moving to the normal safety of government issued bonds or the Euro, investors are moving to gold.

Volatility in the gold price is expected as we break through to new levels, but given the bullish attitude towards gold as a long term investment, the overall trend is expected to be up.

ENDS

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