New return to safety assets

The ounce of gold hit on Tuesday a new record of $ 1,578.59 / oz. This level was not seen since May 2, 2011 when the price hit a high at 1576.06. Some analysts judge the hike in gold prices as a speculative bubble. Others see in this market typically developing European response to the crisis.

Moody's downgraded Irish debt rating to Baa3 on Tuesday night, putting the country on a negative outlook. The fiscal crisis in Europe continues without finding a convincing solution for investors and we are witnessing a downwards trendingmovement on the the euro since the beginning of the week. Against a bleak  bonds and equity markets, the ounce of gold takes great advantage of the flight to quality run by investors. The upward trend is strong and will be confirmed if the price will reach the psychological threshold of $ 1600 / oz.

Demand for gold is determined by several factors: First, gold has always been a hedge against inflation. In an economic context marked by high inflation shoots, gold remains an effective way to preserve purchasing power. Normally, as prices will continue to ignite and the uptrend in gold will continue. This year central banks were net buyers of gold, contributing to the relatively high demand in this market. Emerging countries, notably China and India in turn increases the commercial consumption of this metal.The economic environment remains fragile on both coasts of the Atlantic as the U.S. government does not find an agreement on the issue of federal debt. The lack of agreement between Obama and Republicans Worry over markets for now, because the problem in the euro area has become more serious. However, international investors have lost confidence in some way in the U.S. dollar and they try to diversify their portfolios by passing on commodity markets. The risk of contagion in the euro area remains high.Because gold is an instrument without other remuneration than the increase of its own price, the price is still very volatile and if indeed there is a bubble going on, the break of the trend will be steep and really fast . Gold is now a barometer of the global financial system' health. As the current situation is not resolved in a sustainable manner, we will not see a major reversal of trend