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Gold: A Precious Thermometer

Paul Volcker, ex-Chairman of the Federal Reserve, once famously referred to gold as ‘the enemy’ of central banks and policy makers. In this article, I will explain the recent large swings in gold prices and, by doing so, explain why gold continues to be a precious thermometer for economic sentiment and the enemy of policy makers.

At a basic level, there are two opposing forces which drive gold price movements. The first is inflation. The second, and perhaps the more topical, is the general fear of economic collapse. I will now explain these two opposing forces and which is principally responsible for driving the current movements in gold prices. Click here to keep reading

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Will the French austerity plan be enough?

Talk about the eurozone sovereign debt crisis seemed to have all but stopped once the Libyan affair has gathered pace once more. I suppose this is unsurprising given that this is an oil-producing country and so the jittery Gnomes of Zürich have now got something new to focus on as they crunch numbers. That was until yesterday when the French unveiled their long-awaited package of austerity measures (well I suppose it might have seemed like a long time for Monsieur Sarkozy). Perhaps it is cynical to believe that the catalyst for this was the fiercely denied speculation that the French were to follow in the footsteps of the USA and Japan in having their credit rating reduced. Even if it wasn’t true, it is not outside the realm of possibility considering that, according the Financial Times, the level of French sovereign debt was only just beaten by the Americans. Read the rest of this entry

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