Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Profit Taking, U.S. Debt Default Risks Increase Insurance Costs

Commodities / Gold and Silver 2011 May 26, 2011 - 10:41 AM GMT

By: GoldCore

Commodities

Best Financial Markets Analysis ArticleGold and silver are lower today with profit taking, Chinese bond buying and increased risk appetite being cited for the price falls. Gold is marginally lower in all currencies and is 0.2% lower in U.S. dollar terms despite the dollar coming under selling pressure again this morning. Risky assets have recovered somewhat from recent losses with Asian and European equities and commodities receiving a bid.


Cross Currency Rates

Reports of China buying Eurozone government debt may have led to a rise in the euro and equities. However, the scale of sovereign debt risk internationally is such that even significant and ongoing Chinese buying would be unlikely to contain the crisis.

Sovereign debt risks in Europe and internationally continue to threaten the increasingly fragile economic recovery.

While most of the focus has been on Greece and Eurozone sovereign debt issues, the not insignificant risk posed by a U.S. sovereign debt crisis increases by the day. The risk of a US default continues to rise which can be seen in the sharply increased cost to insure U.S. sovereign debt.

Risk of a U.S. default can be seen in the credit default swap (CDS) market. 1 year U.S. CDS has risen from 23 to 37 or by 60% in the last six trading days (see chart below). According to this measure, the U.S. is now more likely to default than Slovenia and Indonesia in the next year.

US CDS 1 Year – 3 Month Duration – US (brown), Japan (Yellow), UK (Purple)

In the more liquid 5 year U.S. CDS, the cost to insure has risen by some 50% in the last week. The U.S. is considered more likely to default in 5 years time than South Africa, Malaysia, Panama, Brazil and Colombia.

Credit default swaps on U.S. debt saw a flutter of activity in the past week with investors placing 135 trades in U.S. CDS in the week ended May 20, far above previous weeks, when in some cases only one contract trade was seen.

This compares to 360 CDS trades in the week on Spain's sovereign debt, 191 on Greece, 142 on Portugal and 136 on Italy.

Volumes in U.S. CDS have been ticking up, though at about $4 billion they remain significantly lower than the $9 trillion in outstanding U.S. Treasuries.

The squabbling between Democrats and Republicans last week as the U.S. debt ceiling of $14.3 trillion was being reached did not help sentiment towards U.S. debt.

Gold Bullion in US Dollars – 30 Days (Tick)

Nor did former Soros’ partner Stanley Druckenmiller, the billionaire former-hedge fund manager and legendary investor, comment in the Wall Street Journal that the Federal Reserve’s bond purchases are a fraud and a “Ponzi scheme”.

He advocated a U.S. default or a technical default, saying “technical default would be horrible, but I don't think it's going to be the end of the world. It's not going to be catastrophic."

Credit default swaps are far from a perfect way to establish credit worthiness and risk of default of countries. However, it is arguable that quantitative easing and governments internationally, including the US, electronically creating money in order to buy huge tranches of newly created government debt has significantly distorted the government debt markets. Thus, record low yields are artificial and are not a good way of measuring fiscal and monetary risk.

The market manipulation that is QE1, QE2 (and possibly QE3, QE4 etc.) has completely distorted the free market in U.S. government debt and indeed all capital markets. It has led to artificially low interest rates in the US and internationally.

It has been successful in the short term in keeping yields low but short term panaceas have a habit of becoming long term illnesses.

While a US default would not be “catastrophic” it would likely lead to a very sharp fall in the U.S. dollar, (especially versus the hard currency, collateral and monetary asset that is gold), sharp fall in U.S. bonds and sharply higher interest rates.

This has the potential to create another systemic crisis involving sovereign nations and banks globally and could lead to a deep recession, a Depression and in a worst case scenario - hyperinflation.
Gold
Gold is trading at $1,520.69/oz, €1,072.87/oz and £932.65oz.
Silver
Silver is trading at $37.13/oz, €26.20/oz and £22.74/oz.
Platinum Group Metals
Platinum is trading at $1,770.75oz, palladium at $745/oz and rhodium at $2075/oz.

GOLDNOMICS - CASH OR GOLD BULLION?



'GoldNomics' can be viewed by clicking on the image above or on our YouTube channel:
www.youtube.com/goldcorelimited

This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

IRL
63
FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

UK
NO. 1 CORNHILL
LONDON 2
EC3V 3ND

IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160

W www.goldcore.com

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in