{"id":24283,"date":"2011-10-05T09:09:15","date_gmt":"2011-10-05T13:09:15","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=24283"},"modified":"2011-10-05T09:09:15","modified_gmt":"2011-10-05T13:09:15","slug":"gold-tests-1600-eurozone-politicians-fear-banking-crisis-advanced-economies-slow","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/10\/05\/gold-tests-1600-eurozone-politicians-fear-banking-crisis-advanced-economies-slow\/","title":{"rendered":"Gold Tests $1600, Eurozone Politicians Fear “Banking Crisis”, Advanced Economies Slow"},"content":{"rendered":"

London Gold Market Report<\/strong>
\nfrom Ben Traynor<\/strong>
\nBullionVault<\/a><\/strong>
\nWednesday 5 October, 08:00 EDT<\/strong><\/p>\n

SPOT MARKET\u00a0gold prices\u00a0fell below $1600 per ounce for the second time in less than 24 hours Tuesday morning in London \u2013 testing a level first breached on the way up back in July \u2013 before rebounding, while stocks and commodities rallied and government bond prices dipped following news that EU ministers are contemplating a European bank recapitalization.<\/p>\n

Outflows from the world’s largest\u00a0gold ETF\u00a0the SPDR Gold Trust (ticker GLD) saw the gross tonnage of gold held to back its shares fall to its lowest level since July 14 yesterday.<\/p>\n

Tuesday saw\u00a0gold prices\u00a0fall nearly 5% from peak to trough.<\/p>\n

“Gold has not performed as well as might be expected in the last two weeks given the world’s economic woes,” says one bullion dealer in London.<\/p>\n

“Yesterday’s moves,” adds a note from UBS, “highlight the difficulty of making sense of the gold market in the current shaky environment… volatile price action is clearly going to persist.”<\/p>\n

Silver prices\u00a0meantime dropped to $28.46 this morning \u2013 9.4% down on this week’s high.<\/p>\n

European finance ministers \u2013 who met in Luxembourg earlier this week \u2013 are considering plans to recapitalize the continent’s banking sector, the Financial Times reported on Tuesday.<\/p>\n

“Everyone [at the meeting] said the big concern is that worrying developments on the financial markets will escalate into a banking crisis,” said German finance minister Wolfgang Schaeuble.<\/p>\n

Schaeuble denied there was any discussion at the meeting of proposals to increase the purchasing power of the European Financial Stability Facility \u2013 the Eurozone’s \u20ac440 billion bailout fund \u2013 by using leverage.<\/p>\n

“We have to restore confidence quickly,” Antonio Borges, Europe director at the International Monetary Fund, said on Wednesday.<\/p>\n

“Many investors have become far more risk averse than they were before…[the IMF is] offering to be co-operative and to work alongside [Eurozone governments].”<\/p>\n

“Another drying up of liquidity…would be bearish for all commodities, including gold,” says marc Ground, commodities strategist at Standard Bank.<\/p>\n

“However, we believe that central banks are better prepared, and more willing, to avoid a repeat of 2008. As a result, the risk remains, but it is not as acute as it was in 2008.”<\/p>\n

Ratings agency Moody’s announced Tuesday that it has downgraded Italian government debt by three notches \u2013 from Aa2 to A2 \u2013 citing “the sustained and non-cyclical erosion of confidence in the wholesale finance environment for Euro sovereigns.”<\/p>\n

Fellow rating agency Standard & Poor’s last month downgraded Italy one notch from A+ to A. Both ratings agencies maintain a negative outlook for Italy’s credit rating.<\/p>\n

Moody’s said yesterday it “expects fewer countries below Aaa to retain high ratings”, adding that “all but the strongest Euro area sovereigns are likely to face sustained negative pressure”.<\/p>\n

Despite the downgrade, the benchmark yield on 10-Year Italian government bonds remained below 5.6% Wednesday morning \u2013 compared to a September high of 5.76%. Italian 10-Year bond yields breached 6% in August \u2013 prompting the European Central Bank that month to begin buying them on the open market, along with Spanish bonds.<\/p>\n

Jean-Claude Trichet \u2013 who steps down as ECB president at the end of October \u2013 said yesterday that it is the responsibility of Eurozone governments, not of the ECB, to ensure financial stability. The ECB’s Governing Council will meet tomorrow to decide interest rate policy \u2013 the last such meeting of Trichet’s tenure.<\/p>\n

Eurozone GDP meantime grew at 0.2% in the second quarter of the year \u2013 down from 0.8% in Q1 \u2013 according to official data published Wednesday.<\/p>\n

Here in London meantime, the Bank of England’s Monetary Policy Committee will also announce its latest decisions on Thursday.<\/p>\n

The MPC \u2013 which has kept its interest rate at 0.5% since March 2009 \u2013 is reportedly under increased pressure to consider further quantitative easing measures, following this morning’s downward revision of second quarter UK growth to 0.1%, half the rate previously reported.<\/p>\n

Over in the US, the Federal Reserve will “continue to closely monitor economic developments and is prepared to take further action as appropriate,” Fed chairman Ben Bernanke told Congress on Tuesday.<\/p>\n

Bernanke said the Fed “now expects a somewhat slower pace of economic growth” than its economists previously forecast.<\/p>\n

“Gold prices\u00a0will continue to be driven in large measure by the evolution of US real interest rates,” said a note from Goldman Sachs yesterday.<\/p>\n

“With our US economic outlook pointing for continued low levels of US real rates in 2012, we continue to recommend long trading positions in gold.”<\/p>\n

Ben Traynor<\/strong>
\nBullionVault<\/strong><\/p>\n

Gold value calculator \u00a0\u00a0| \u00a0\u00a0Buy gold online at live prices<\/strong><\/a><\/p>\n

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.<\/p>\n

(c) BullionVault 2011<\/strong><\/a><\/p>\n

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events \u2013 and must be verified elsewhere \u2013 should you choose to act on it.<\/p>\n","protected":false},"excerpt":{"rendered":"

London Gold Market Report from Ben Traynor BullionVault Wednesday 5 October, 08:00 EDT SPOT MARKET\u00a0gold prices\u00a0fell below $1600 per ounce for the second time in less than 24 hours Tuesday morning in London \u2013 testing a level first breached on the way up back in July \u2013 before rebounding, while stocks and commodities rallied and … <\/p>\n

Continue reading “Gold Tests $1600, Eurozone Politicians Fear “Banking Crisis”, Advanced Economies Slow”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24283","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24283","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=24283"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24283\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24283"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24283"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24283"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}