Gold surges in all currencies as investors take flight


By Neil Behrmann

March 2008:- Gold has been in a bull market for six years and has soared in all currencies.

The latest leg of the bull market began late June last year, soon after two Bear Stearns hedge funds, managing investors’ money totalling $1.6 billion and with estimated debts of $10 billion to $20 billion, failed. Since then turmoil in the market, notably the bail out of Bear Stearns, has worsened. The Federal Reserve has been forced to slash interest rates by 0.75% to 2.25% and  the US and European central banks have pumped money into the system.

The credit crunch continues to be dangerous with market participants questioning the viability of banks and highly leveraged hedge funds. Several hedge funds have already closed down.

Little wonder that the gold bull market has accelerated with bullion at one stage touching a peak of $1032 an ounce, matching the forecasts of the majority of analysts at the beginning of the year. In the past few days investors bought some 500,000 ounces of bullion that flowed into Exchange Traded Gold products. Those products already hold around 29 million ounces.

In today’s money the 1980 peak of $850 would be around $2,200. Thus several gold bulls are predicting that the price will top $2,000. It is risky to buy gold on that assumption. A price is what the market pays for it at a particular point of time. If there is a general commodity price slide--and such is the bubble that the danger is there-- the gold price could fall sharply.

 

Gold's performance in various currencies

Currency

Price June 25 2007

Price Mar 18 2008

Gain

US dollar

651

1006

55%

Euro

484

637

30%

Yen

80540

98890

22%

Sterling

326

498

53%

Rand

4658

8088

74%

Australian dollar

767

1073

40%

Indian Rupee

26593

40944

54%

 

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