IMF: Gold Is Scarce “Safe Asset” And “Growing Shortage of Safe Assets”
Thursday, 12 April 2012
Gold fell $0.90 or 0.05% in New York yesterday and closed at $1,658.10/oz. Gold has been trading sideways in Asian trading and remains in a tight range in Europe this morning near $1,656.07/oz.
Gold remains supported this morning as the ECB signalled that it would intervene in the debt markets on worries about Spain and the risk of contagion in the Eurozone. ECB board member Benoit Coeure said “the European Central Bank still has its bond-buying programme as an option”.
Investors are also still concerned about other peripheral Eurozone economies like Italy and how they might affect the core Eurozone nations. Italy saw its 1 year borrowing costs rise for the first time since November during its sale of short term bills yesterday, ahead of a 3 year bond auction later today.
The number two official at the US Fed, Yellen, said overnight that due to high unemployment facing the economy, the Fed has left the door open to further Fed action including QE.
Further QE and the continuation of ultra loose monetary policies will be positive for gold.
IMF: Gold Is Scarce “Safe Asset” And “Rising Demand for Safe Assets”
Further confirmation of gold’s continuing but gradual renaissance as a safe haven asset was given by the IMF yesterday who warned that a “growing shortage of safe assets” poses a threat to “global financial stability.”
The IMF identified $74.4 trillion of potentially safe assets today, including gold, investment grade government and corporate debt, and covered bonds.