Gold bullion as safe havens

Gold enjoyed a resurgence in safe-haven buying this morning, after extremely disappointing US non-farm payrolls numbers (which grew by a meagre 18k, falling far short of the market forecast for 105k). This has dented confidence in the US recovery and once again raised expectations for a third round of quantitative easing by the Fed. However, we do not expect QE3 as a base case. Our bullish view on gold is independent of further quantitative easing, and rather derives from our expectation of increased global liquidity stemming from growing government borrowing, especially in the developed world.

Equity markets across Asia and Europe were sharply lower Monday amid escalating concerns over the euro zone sovereign debt crisis. Herman Van Rompuy, European Council President, called an emergency meeting of top policymakers to discuss the debt crisis, in light of growing fears that Italy may be the next member of the PIIGS to need financial assistance.

U.S. equity markets were set to open considerably lower, with S&P 500 futures down 17.25 points at 1,324.50. Investors moved into the U.S. dollar and gold bullion as safe havens. Gold rallied $12.05 to $1,556.26 per ounce, while the euro currency tumbled 1.3% to 1.4028 against the dollar in morning trading.