Gold was trading down slightly yesterday morning, off $3.41 to $1,714.60 an ounce and silver is down $0.18 to $33.39. This is one of those odd days that gold tracked opposite the dollar, as one would expect, but crude oil bucked the trend and was up.
More bad news for the Euro-zone as France, Britain, and Austria received a warning from Moody’s that they could lose their AAA rating. Italy, Spain and Portugal received warnings of further downgrades. Really, so what? A credit downgrade might raise the cost of borrowing slightly for some countries, but since credit ratings are all relative a country’s rating is not as significant as how they stack up against other countries. So, if the whole world is AA+, then AA doesn’t look that bad. Bond auctions determine what countries pay for credit, not their credit rating.
As long as countries can continue borrowing money, independent of their credit rating, the global currency race to the bottom continues unabated and we’re all stuck in a global economy where debt is money. One thing is for certain, our worldwide currency follies and the endless wheel of borrowing will not end well.