Gold to follow Yellen's IMF speech

  • Today’s AM fix was USD 1,326.75, EUR 970.98 and GBP 772.80 per ounce.
  • Yesterday’s AM fix was USD  1,325.75, EUR 968.48  and GBP 773.39 per ounce.  

Gold fell $1.70 or 0.13% yesterday to $1,326.80 per ounce and silver slipped $0.04 or 0.19% to $21.05 per ounce.

Gold might be just finding favor once again with investors, as shown by its recent price gains. If only anecdotally, evidence in the form of an increase of assets held in the SPDR gold trust over the past two days shows as much. Bloomberg reports this increase (796.39 tonnes) is the largest two-day rise since November 2011.

Gold's price will take its cue, no doubt, from Janet Yellen's speech to the International Monetary Fund today, where the market is seeking guidance on the the timing of interest rate hikes following the end of QE3.

BNP sanctions

Has the U.S. shot itself in the proverbial foot? Well, possibly.

Short-sighted U.S. sanctions against BNP could spur the end of the U.S. dollar as a reserve currency. The U.S. has agreed to a whopping $9 billion fine against BNP Bank for breaking rules related to transactions with Sudan and Iran.

Some of BNP's business units are being restricted in their ability to clear USD transactions. This represents a new weapon in the world of financial sanctions and one that could have far reaching consequences. Essentially, because U.S. dollars are used globally in transactions, all dollars are eventually processed by a U.S.-based bank, thus giving U.S. authorities de facto jurisdiction over such transactions.

There can be no question of the ethical benefit to the world of a policeman enforcing sanctions on rogue states who persecute their people, but if overused and without agreement with one’s allies, such sanctions will spur the world of international trade and governments to seek out alternative currencies. China may be one step closer to usurping the U.S. dollar with the renminbi. A rubicon moment for the reserve dollar? Perhaps; we will see.

About the Author
Stephen Flood is a director of Ireland-based GoldCore.