GOLD BREAKS THROUGH $1,000 LEVEL AGAIN - The price of gold has broken through the significant $1,000 barrier again and it is up nearly 14% this year. Gold prices are linked to the dollar and when the dollar weakens - as it is doing right now - gold tends to rise. The precious metal is looked on as a safe haven for money and this latest surge had been driven by speculators who want to avoid inflation eating up their assets' values.
Steven Flood is a director of the Goldcore company, which acts as a broker for anyone looking to buy or sell gold. He says the current gold rush may be indicative of the fact that the talk of green shoots of recovery may be a bit premature and says the world economy is still in a contraction phase. He says a lot of economists, bankers and investors are looking towards governments to see what fiscal stimuli they are going to continue to pour into local economies.
Mr Flood says that gold was trading at $425 at the beginning of 2005 and has since jumped to over $1,000, indicating that it is in a very strong upward direction. Mr Flood says that while the physiological level of it has been tested a few times, prices have pulled back and he says it has touched the €1,000 a few times recently. He says it is looking very strong technically and predicts that prices will continue to rise.
He says that many central banks around the world, who are sitting on a lot of paper dollars and who are quite worried, are currently in the market for gold as a hedge against the dollar. He explains that the fiscal stimulus plan being used by the US government in recent months has been to literally electronically print money. This leads to inflation fears for the dollar and this is a cause of concern for central banks who are holding a lot of the greenback. Investors are also adding gold to their portfolios as a hedging option.
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MORNING BRIEFS - Ireland has slipped three places in a competitiveness league compiled by the World Economic forum. The country is ranked 25th out of 133 in the latest review - and looked at it the context of the EU-15 - only Spain, Portugal, Italy and Greece rank lower. The World Economic Forum says Ireland's huge budget deficit is to blame for the slip.
*** Bad news for four of the Irish banks with the credit agency Fitch warning that it could cut their ratings in the expectation that the Government will curtail the bank guarantee. The current scheme is due to run out in September next year and while Brian Lenihan is expected to extend it, he has hinted that it will be less universal.
Fitch says the replacement is likely to exclude some bondholders to bring it into line with the guarantees offered by other EU countries and it has signalled that the ratings on AIB, Bank of Ireland, EBS and Nationwide may be downgraded next year.
*** Oil prices have jumped 4.5%, their biggest gain in nearly three weeks. The surge above $70 per barrel comes as OPEC meet today but the oil cartel are likely to keep output restrictions in place.
*** The former chairman of the Federal Reserve, Alan Greenspan, has warned that a similar crash could happen again but in a slightly different way. On the current problems, Mr Greenspan told the BBC he had predicted the downturn would come as a reaction to a long period of prosperity. But while it may take time and be a difficult process, the global economy will eventually get through it, he says.
*** The Financial Times is reporting today that Moody's is set preserve Britain's top credit rating saying a downgrade is unlikely despite our neighbour's enormous budget deficit. The agency is expected to say the rise in debt appears affordable, particularly given signs that all the main political parties agree on the need to reduce public spending. Chancellor Alistair Darling has repeated his prediction that the economy would return to growth at the end of the year.
*** There was more good news for Britain today with consumer morale jumping higher in August while employers took on more staff and price pressures eased. The Nationwide Consumer Confidence index rose two points last month - hitting its highest level since May 2008.
*** On the currency markets the euro is trading at $1.45 cents, and 87.5 pence sterling.
