British Pound at Risk Of "Large-Scale Devaluation" As Currency Wars Intensify

By: GoldCore

Today’s AM fix was USD 1,613.50, EUR 1,208.80 and GBP 1,041.57 per ounce.
Yesterday’s AM fix was USD 1,611.25, EUR 1,206.39 and GBP 1,041.53 per ounce.

Silver is trading at $30.13/oz, €22.68/oz and £19.56/oz. Platinum is trading at $1,700.25/oz, palladium at $765.00/oz and rhodium at $1,245/oz.

Gold slipped 0.1 percent to $1,607.06/oz on Monday after falling as low as $1,598.04/oz on Friday, its weakest since August.

Cross Currency Table – (Bloomberg)

Gold inched up Tuesday morning, however the dollar’s rise to a one month high limited bullion’s gains.

European markets are cautious ahead of Italy’s elections on Feb. 24-25th, including candidate and former Prime Minister, Silvio Berlusconi. Mario Draghi urged finance chiefs from the G20 to be “prudent” when talking about currency movements.

The Bank of Japan’s minutes to their policy meeting noted that the government’s asset purchasing plan could continue for 5 years.

The U.S. Federal Reserve’s policy minutes are available tomorrow, and will be closely scrutinized.

India's duties on gold imports may increase in an effort to decrease the country’s account deficit said an employee from the largest state run gold importer.

More violence in South Africa as 4 security guards were disfigured with machetes and at least 13 people were injured, in a labour fight at Anglo American Platinum.

Iran said it will not close the Fordow nuclear plant yesterday. Ramin Mehmanparast, spokesman for Iran's foreign ministry, commented that the reported offer was unacceptable. However, they are ready for logical negotiations, he noted.

Currency Ranked Returns in Great British Pounds – (Bloomberg)

The pound took a fresh beating yesterday as concerns of currency wars and debasement of sterling led to another sell-off and experts said the currency was at risk of a "large-scale devaluation".

Sterling trails only Japan's yen as the worst performer against a basket of international currencies this year as a 4.5 per cent decline fuels import prices and pushes up the cost of food, insurance and other necessities for hundreds of thousands of households.

As central banks tolerate higher levels of inflation, the pound is set to weaken further across the board particularly against safe haven gold.

UBS warned that the pound seems clearly at risk of following the yen and "suffering the next large-scale devaluation."

Dealers also noted weekend comments from Bank of England rate-setter Martin Weale, who warned the pound was still too high to help the UK economy rebalance effectively. The continued pressure on the currency comes after its biggest weekly loss since June last year amid gloom over weak growth prospects.

The Bank of England has signalled it is willing to tolerate higher inflation for longer, while the pound's safe-haven appeal has also waned as the European Central Bank makes explicit commitments to prop up Eurozone strugglers and preserve the single currency.

XAU/GBP Daily, FEB2108-19FEB13– (Bloomberg)

The yen also fell as the G20's finance ministers in Moscow shied away from criticism of Japan for weakening its currency. Prime Minister Shinzo Abe has repeatedly called for a cheaper currency in order to help the country's exporters compete.

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Mark O'Byrne
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WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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