On Monday, gold (NYSEARCA:GLD) surged $35 to hit a new six week high of $1,791 per ounce, while silver (NYSEARCA:SLV) climbed 74 cents higher to nearly $35 per ounce. Precious metals (NYSEARCA:DBP) continue to receive a boost as countries reveal what they really think about the shiny metals.
Investor Insights: The Euro Mess Brings Out the Best in Gold.
After an interest rate cut from the ECB last week, and alarming government bond rates in Portugal and Italy, there is no way Germany is going to pledge its gold as a euro solution. There was speculation over the weekend at the G20 summit that German gold may be sold in order to boost the European bailout fund. However, the Bundesbank and Mr. Seibert, spokesman for Merkel, ruled out the idea of Germany parting ways with their gold reserves. Mr. Seibert explained, “Germany’s gold and foreign exchange reserves, administered by the Bundesbank, were not at any point up for discussion at the G20 summit Cannes.”
Late Monday, it was revealed that China (NYSE:FXI) is continuing to purchase gold. Financial Times reports, “Chinese gold imports from Hong Kong, a proxy for the country’s overall overseas buying, leapt to a record high in September, when monthly puchases matched almost half that for the whole of 2010. Data from the Hong Kong government showed that China imported a record 56.9 tonnes in September, a sixfold increase from 2010” China appears to be employing the textbook Warren Buffett (NYSE:BRK.A) strategy, “Be greedy when others are fearful.” By the end of September, gold prices fell more than 15% after reaching $1,900 an ounce early in the month. “In September, we saw some bargain hunters come back into the market on the price dip,” said Janet Kong, managing director of research for CICC, the Chinese investment bank.
Buffett Watch: Warren Buffett’s Big Equities Bets in Q3.
The loyalty of the Germans and Chinese to maintain and add gold holdings is a perfect example of a safe-haven asset. Despite market volatility and headline driven fears, precious metal investors continue to rely on the long-term stability of gold and silver.
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