{"id":24669,"date":"2011-10-24T09:10:28","date_gmt":"2011-10-24T13:10:28","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=24669"},"modified":"2011-10-24T09:10:28","modified_gmt":"2011-10-24T13:10:28","slug":"gold-climbs-were-not-there-yet-say-eurozone-leaders-final-package-unlikely-to-be-bold","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/10\/24\/gold-climbs-were-not-there-yet-say-eurozone-leaders-final-package-unlikely-to-be-bold\/","title":{"rendered":"Gold Climbs, “We’re Not There Yet” say Eurozone Leaders, Final Package “Unlikely to be Bold”"},"content":{"rendered":"

London Gold Market Report<\/strong>
\nfrom Ben Traynor<\/strong>
\nBullionVault<\/strong><\/a>
\nMonday 24 October, 08:00 EDT<\/strong><\/p>\n

THE SPOT MARKET\u00a0gold price\u00a0climbed to $1657 an ounce Monday morning London time \u2013 a 0.9% gain on last week’s close \u2013 as markets digested the news from the first of this week’s two European Union summits.<\/p>\n

European stock markets failed to hold onto early gains \u2013 with Germany’s DAX down 0.5% by lunchtime \u2013 while commodities edged up and US Treasury bond prices rose.<\/p>\n

The\u00a0Silver Price\u00a0bounced between $31.77 and $31.27 per ounce.<\/p>\n

“The main level to watch now [for the\u00a0gold price] is the $1,627-$1,595 where the market is currently finding some support,” says Reuters technical analyst Phil Smith.<\/p>\n

“Gold looks set to benefit from the renewed concerns about inflation and currency debasement that any cure for Europe’s ills will inevitably fuel,” says a research note from Barclays Capital.<\/p>\n

Italy’s prime minister Silvio Berlusconi scheduled an emergency cabinet meeting for Monday evening, following the weekend’s European Union summit at which he was reportedly told by fellow Eurozone leaders to draft legislation on fiscal reforms ahead of a second summit this Wednesday.<\/p>\n

“Italy has great economic strength,” German chancellor Angela Merkel said on Sunday.
\n“But Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead.”<\/p>\n

Merkel appeared to smirk when asked if she was reassured by her meeting with Berlusconi.<\/p>\n

Yields on 10-Year Italian government bonds spiked to 5.97% Monday morning \u2013 after breaching 6% last week for the first time since the European Central Bank began buying Italian debt in August.<\/p>\n

“Work is going well on the banks,” French president Nicolas Sarkozy said Sunday.<\/p>\n

“[As well as] on the [European Financial Stability Facility] fund and the possibilities of using the fund…on the question of Greece, things are moving along. We’re not there yet.”<\/p>\n

Sarkozy dropped his proposal that the EFSF be funded by the ECB, a move opposed by Germany.<\/p>\n

“Central banks should not be called upon to finance states,” said German finance minister Wolfgang Schaeuble.<\/p>\n

It remains undecided how the EFSF will be funded and for what precisely it will be used.<\/p>\n

Europe’s banks meantime will need to find \u20ac108 billion of new capital within the next nine months, according to the Financial Times. The shortfall was reportedly identified by stress tests carried out by the European Banking Authority, which required a Tier 1 capital ratio of 9% to pass.<\/p>\n

Banks have agreed to a voluntary ‘haircut’ of 40% on their Greek bond holdings \u2013 while politicians want it to be at least 50% \u2013 news agency Reuters reports. Banks agreed a 21% haircut back in July, but this is now seen as insufficient.<\/p>\n

The EU said Friday it will pay its \u20ac5.8 billion share of Greece’s next bailout installment worth around \u20ac8 billion in total.<\/p>\n

“Ahead of the Wednesday summit, there remain many open questions,” reckons Juergen Michels, lead Euro area economist at Citigroup in London.<\/p>\n

“It seems that progress has been made over the weekend to get to a ‘comprehensive package’, but it is unlikely to be a bold one.”<\/p>\n

Over in India \u2013 which today celebrates the festival of Dhanteras, the start of the five-day festival of Diwali \u2013 the rise in the\u00a0gold price\u00a0since last year means gold sales “are lower in volume but higher by value”, according to Prithviraj Kothari, director of the Bombay Bullion Association, adding that sales by volume have reduced by up to 30% in some parts of Mumbai.<\/p>\n

“With high inflation there is hardly any money left with people to invest in gold. I fear that this year jewelry sales may be 20-30% lower than last year.”<\/p>\n

The United States is expected to experience “at least one credit downgrade in late November or early December,” according to analysts at Bank of America Merrill Lynch. Their report cites a bipartisan “super committee” formed by Congress to address the deficit \u2013 and which is due to agree $1.2 trillion worth of deficit reduction measures by November 23.<\/p>\n

Ratings agency Standard & Poor’s downgraded the US one notch to AA+ in August. US government debt is still rated triple-A by Fitch and Moody’s, the other two major ratings agencies.<\/p>\n

In New York meantime the ‘speculative’ net long position of bullish minus bearish gold futures\u00a0and options contracts held by noncommercial Comex traders fell 4.8% in the week ended Tuesday 18 October \u2013 hitting its lowest level since May 2009 \u2013 figures published on Friday show.<\/p>\n

“The past week’s deterioration confirms that the speculative market is indeed cautious about gold’s short-term prospects,” says Marc Ground, commodities strategist at Standard Bank.<\/p>\n

“However, positioning remains uncommitted either way, so participants don’t seem particularly worried about the\u00a0gold price\u00a0falling off a cliff.”<\/p>\n

“Despite the two-year low in net spec length,” adds a note from precious metals consultancy VM Group, “the ratio between gross longs and gross shorts remains above this year\u2019s low…and well above lows recorded in 2009 and 2008.”<\/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><\/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":"

THE SPOT MARKET gold price climbed to $1657 an ounce Monday morning London time \u2013 a 0.9% gain on last week’s close \u2013 as markets digested the news from the first of this week’s two European Union summits.<\/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-24669","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24669","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=24669"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24669\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}