Gold stages strong recovery in overnight markets, China yuan policy and Iran sanctions major influences

Gold staged a strong recovery overnight bouncing off lows at $1207 to trade as high as $1216 in overnight markets. It has since backed off a bit in early New York trading – now at $1213.50 on the day and up $4.50. Silver is also up trading at $15. Gold is supported by two ongoing influences this morning – China’s reinforcing of intentions to stabilize the yuan and the America’s imposition of sanctions on Iran. The first sends a signal to speculators to tread carefully shorting the yuan. The second drives home the reality of oil supply disruptions and the heightening of tensions throughout the Middle East.

Quote of the Day
“It doesn’t matter where the crisis begins. Once the tsunami hits, no one will be spared. The stock market is going to correct in the face of rising credit losses and tightening credit conditions. No one knows exactly when it’ll happen, but the time to prepare is now. Once the market corrects, it’ll be too late to act. That’s why the time to buy gold is now, while it’s cheap. When you need it most, once the crisis hits, it’ll cost a fortune.” – James Rickards, Daily Reckoning

Chart of the Day

Chart note: This chart illustrates Rickards’ point made in our Quote of the Day about the escalating cost of gold during crisis periods. During the 1970s, an inflationary crisis moved prices radically higher with 1980 registering the greatest increase right at double the previous year. The disinflationary crisis of the 2000s also instigated significant year over year increases with 2006 posting the largest at nearly 36%. For those who understand the inevitability of business and economic cycles, the time to buy gold is when everything is quiet – in times like the present.

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