Global Market Paralysis Sees Gold Holding Onto Gains
Gold is trading at USD 1,653.45, EUR 1,210.52, GBP 1,055.44, JPY 126,298.80, AUD 1,665.32 and CHF 1,477.66 per ounce.
Gold’s London AM fix this morning was USD 1,655.00, EUR 1,214.77,and GBP 1,059.37 per ounce.
Yesterday’s AM fix was USD 1,671.00, EUR 1,236.40, and GBP 1,075.50 per ounce.
Global market sentiment is mixed; all eyes are focused on Europe and its ability to forge a resolution to an expected Greek default. Finance ministers are wrestling with the depth of commitment needed to shore up the Euro and the mechanisms needed to manage such a fund. There is as of yet no consensus and thus we see choppy markets nervously digesting sound bites from the many voices of modern European monetary policy.
Barroso State of the (Dis)Union Address
The biggest sound bite of the day comes from the European Commission President Manuel Jose Barroso where in his annual State of the Union address stated that, "We need to complete our monetary union with an economic union. It was an illusion to think that we could have a common currency and a single market with national approaches to economic and budgetary policy." Which was quite an admission from the heart of Europe.
Regarding The European Financial Stability Fund EU President Barroso Commented
"The EFSF must immediately be made both stronger and more flexible. This is what the Commission proposed already in January. This is what heads of state and government of the Euro area agreed upon on July 21. Only then will it be able to deploy precautionary intervention, intervene to support the recapitalization of banks, intervene in the secondary markets to help avoid contagion. Once the EFSF is ratified, we should make the most efficient use of its financial envelope. The Commission is working on options to this end. Moreover we should do everything possible to accelerate the entry into force of the ESM (European Stability Mechanism). And we trust that the European Central Bank, in full respect of the Treaty, will do whatever is necessary to ensure the integrity of the euro area and to ensure its financial stability."
He also took the time to cast a stone or two at the U.S. by saying he was "aggrieved when I see people patronising us and telling us what to do. No one tells Europe what to do." His comment was echoed by Germany's Finance Minister, Mr. Schauble, when he commented on the deployment of leverage to the EFSF €440 billion fund to bring the total fund fire power to circa €2 trillion as being "stupid", specifically he stated "I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense,.....It's always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the U.S. government."
Are they Playing Chicken?
Such comments merely add to market tension as it indicates that on the surface at least the Eurozone leaders and the U.S. administration are not seeing eye to eye. It also stands in contrast to the U.S. Federal Reserve to act as lender as last resort to European Financial Institutions. It may transpire that the U.S. comments and the retort are designed to bolster public opinion in donor countries to support a grand plan, when it is unveiled.
What Does This Mean for Gold?
Bargain hunters quickly filled the void left by the speculative hoards Tuesday and bid up gold more than 7%, today the markets are somewhat out of breath and are clearly waiting to gauge the next momentum shift. We are neutral on gold’s near term value.
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Silver is trading at $30.96/oz, €22.69/oz and £19.78/oz
PLATINUM GROUP METALS
Platinum is trading at $1,550.50/oz, palladium at $647/oz and rhodium at $1,575/oz.
Barroso Calls for Faster Start-Up of Permanent Euro Bailout Fund