As expected, the price of gold rose after it became known that Standard & Poor’s rating agency for the first time in history downgraded the US credit rating from the highest AAA to AA +. Thus, the price of gold was able to exceed $ 1,700 per ounce.
Another impetus for the sharp rise in gold prices was the news that the European Central Bank (ECB) will begin buying government bonds from Italy and Spain to curb the eurozone economic slowdown.
Alan Greenspan, a former Fed chief who is now a consulting firm, said in a recent television interview that the truth is that the United States can only pay its debts thanks to the Fed press. Jim Rickards of Tangent Capital spoke about this at the recent Gold Rush 2011 conference in London. Other analysts, such as PIMCO’s Bill Gross, were impressed by Standard & Poor’s, while noting that “a little discipline won’t hurt the U.S. government.”
Also today the dollar has fallen to a low level against the Swiss franc, as have equity markets around the world. The Japanese Nikkei index fell 2.2% in one day. Ironically, U.S. debt bond yields have also fallen. It seems that the habit of traders to buy US debt bonds with the least turbulence in the market will die very hard, even if they support a drop in the rating of US sovereign debt.