Britannia Radio

There is scant cheer in this story.  It is a story pf investors 
running to gold because they are scared.  (the techical details of 
gold trading are less important than the general trend )   Wherever 
you look economies are in trouble.  There’s talk of a bail-out here 
and a bail-out there,  but there is no hiding place - no rock solid 
economy to rescue the world.

In another article Germany hints at baiiing out Ireland.  All very 
nice for the Irish but why does Germany single them out? I suggest an 
answer to that is political and I’ll deal with that separately.
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TELEGRAPH             18.2.09
Gold hits record against euro on fear of Zimbabwean-style response to 
bank crisis
Gold has surged to an all-time high against the euro, sterling, and a 
string of Asian currencies on mounting concerns that global 
authorities are embarking on a "Zimbabwe-style" debasement of the 
international monetary system.

    By Ambrose Evans-Pritchard

"This gold rally is driven by safe-haven fears and has a very 
different feel from the bull market we've had for the last eight 
years," said John Reade, chief metals strategist at UBS. "Investors 
are seeing articles in the press saying governments should 
deliberately stoke inflation, and they are reacting to it."

Gold jumped to multiple records on Tuesday, triggered by fears that 
East Europe's banking crisis could set off debt defaults and lead to 
contagion within the eurozone. It touched €762 an ounce against the 
euro, £675 against sterling, and 47,783 against India's rupee.

Jewellery demand – usually the mainstay of the industry – has almost 
entirely dried up and the price is now being driven by investors. 
They range from the billionaires stashing boxes of krugerrands under 
the floors of their Swiss chalets (as an emergency fund for total 
disorder) to the small savers buying the exchange traded funds 
(ETFs). SPDR Gold Trust has added 200 metric tonnes in the last six 
weeks. ETF Securities added 62,000 ounces last week alone.

In dollar terms, gold is at a seven-month high of $964. This is below 
last spring's peak of $1,030 but the circumstances today are 
radically different. The dollar itself has become a safe haven as the 
crisis goes from bad to worse – if only because it is the currency of 
a unified and powerful nation with institutions that have been tested 
over time. It is not yet clear how well the eurozone's 16-strong bloc 
of disparate states will respond to extreme stress. The euro dived 
two cents to $1.26 against the dollar, threatening to break below a 
24-year upward trend line.

Crucially, gold has decoupled from oil and base metals, finding once 
again its ancient role as a store of wealth in dangerous times.
"People can see that the only solution to the credit crisis is to 
devalue all fiat currencies," said Peter Hambro, chairman of the 
Anglo-Russian mining group Peter Hambro Gold. "The job of central 
bankers is to allow this to happen in an orderly fashion through 
inflation. I'm afraid it is the only way to avoid disaster, but 
naturally investors are turning to gold as a form of wealth insurance."

One analyst said the spectacle of central banks slashing rates to 
zero across the world and buying government debt as if there was no 
tomorrow feels like the "beginning of the 'Zimbabwe-isation' of the 
global economy".
Gold bugs have been emboldened by news that Russia has accumulated 90 
tonnes over the last 15 months.

"We are buying gold," said Alexei Ulyukayev, deputy head of Russia's 
central bank. The bank is under orders from the Kremlin to raise the 
gold share of foreign reserves to 10pc.

The trend by central banks and global wealth funds to shift reserves 
into euro bonds may have peaked as it becomes clear that the European 
region is tipping into a slump that is as deep – if not deeper – than 
the US downturn. Germany contracted at an 8.4pc annual rate in the 
fourth quarter. The severity of the crash in Britain, Ireland, Spain, 
the Baltics, Hungary, Ukraine and Russia has shifted the epicentre of 
this crisis across the Atlantic. The latest shock news is the 20pc 
fall in Russia's industrial production in January. The country is 
losing half a million jobs a month.
Markets have been rattled this week by warnings from rating agency 
Moody's that Austrian, Swedish and Italian banks may face downgrades 
over their heavy exposure to the ex-Soviet bloc. The region has 
borrowed $1.7 trillion (£1.2 trillion) – mostly from European banks – 
and must roll over $400bn this year.

Austria's central bank governor, Ewald Nowotny, said the regional 
crisis had become "dangerous" and called for a pan-EU rescue strategy 
to prevent contagion.

Bartosz Pawlowski, from TD Securities, said the recent plunge in 
currencies across Eastern Europe had come as a brutal shock. "The 
rout could potentially lead to substantial problems, if not an 
outright collapse of the financial system," he said, citing the 
rising real burden of debt taken out in euros and Swiss francs.

Even Poland – a pillar of stability in the region – may ultimately 
need a bail-out by the International Monetary Fund. Latvia, Hungary, 
Ukraine and Belarus have already been rescued. Romania's premier, 
Emil Boc said his country would decide over the next two weeks 
whether to seek an IMF loan. Turkey is next.