The Daily Nugget: Gold Flies

Today has started out to be pretty exciting already with spot gold catching up with the futures price and heading above $1,700.

This is the day Draghi speaks, over a month after promising to do "whatever it takes" to save the euro. All week there have been debates as to whether or not he will announce further plans to buy more bonds in an attempt to (temporarily) ease pressure on both Spanish and Italian governments.

The pressure will certainly be on Mr Draghi to pull out the big guns after data from Markit yesterday showed the single currency union suffered a downturn, far more severe than expected, last month. Whilst many had expected weak data from troubled euro zone countries, observers were surprised to see even Germany feeling the burden of the crisis, the one country investors were hoping would carry the currency members through.

It seems the gold price thinks Draghi will announce something of significance, having jumped to $1,708 this morning, on the back of EUR strength and the weakening USD.

Bloomberg report that Draghi’s blueprint, sent to council members earlier this week, proposes unlimited buying of government debt with maturities of up to about three years. Bundesbank have purportedly expressed opposition to the plan, concerned that the ECB is intervening too far into the markets.

Analysts believe this could go higher should Draghi announce a clear policy framework for containing the eurozone’s debt crisis. Although many are predicting a fall back to the $1676-$1680 range should Draghi disappoint once again.

But is it all down to Draghi?
Gold, along with silver and platinum, have rallied over the last week after Bernanke expressed concern over the worsening US labour market. The US jobs report, the nonfarm payrolls data, released tomorrow is also expected to impact the gold price somewhat. Weaker-than-expected numbers are predicted, prompting speculation that the Federal Reserve will feel compelled to implement QE3 at the next FOMC meeting.

Meanwhile, in Britain
Also today we will receive news from the Bank of England’s Monetary Policy Committee. Nothing of excitement is expected here, with the UK economy looking about as grey as Sir Mervyn, rates are expected to remain the same (0.5%) and the asset purchase programme to carry on as previously indicated.

Things are looking up however for the business environment in the UK which was found to be the eighth most competitive in the world. Despite the fact that we have improved across the board for all measures assessed, we have dropped in the macroeconomic measure. According to the WEF’s index, our macroeconomic environment has worsened by 0.5% – the word’s fifth worst budgetary situation.

Naturally, the Treasury ignored this small issue and credited them and the government’s reforms with the good news, despite the fact that the measures which really made us stand out were in education, skills and training. All things which the government has cut down on or driven up the cost of, i.e. it’s all down to those who actually get the education, training and skills.

Gold, the safe haven
Gold, as we mentioned in the past seems to be hanging on the back of every central banker’s words at the moment. This month is set to be an interesting one for policy announcements and, therefore, gold. However if today and tomorrow show anything they show that things are dangerous on both sides of the pond. Investors are running out of places to turn to as "safe havens," soon they will realise gold bullion investment may be their only option.