Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Rises as Portugal Catches Eurozone Debt Plague

Commodities / Gold and Silver 2011 Jul 06, 2011 - 06:41 AM GMT

By: Ben_Traynor

Commodities Best Financial Markets Analysis ArticleWHOLESALE MARKET gold bullion prices held steady around $1517 per ounce for the bulk of Wednesday morning London time – 2% up from Friday's close – while stocks and commodities slumped and US Treasury bonds gained after Portugal saw its sovereign debt downgraded to junk.


News of a Chinese interest rate rise, however, saw the gold price dip towards lunchtime. The People's Bank of China announced it will raise its one-year deposit rate from 3.25% to 3.5% – its fifth rate hike since last October. 

Official consumer price inflation was at 5.5% in May, with June's figure due out next week.

"We believe the market will retain its bearish slant while [gold] holds below $1518," say technical analysts at gold bullion bank Scotia Mocatta.

Gold prices should "remain in consolidation mode", adds Swiss precious metals refiner MKS, which predicts physical demand for gold bullion will be "lackluster during the seasonally quiet summer months".

The silver bullion price meantime hovered above $35.50 for most of Tuesday morning – 4.8% up for the week so far.

"Precious metals should benefit from the increased demand for safe-haven assets...as risk aversion remains elevated and Eurozone debt concerns continue to plague markets," says Marc Ground, commodities strategist at Standard Bank.

Ratings agency Moody's downgraded Portugal's long term government bonds on Tuesday by four notches – from Ba2 to Baa1 – putting them into junk territory.

Insistence that private creditors take part in efforts to aid Greece "implies a rising risk that private sector participation could become a precondition for additional rounds of official lending to Portugal," a statement from Moody's said.

Not only does this increase the risks faced by current investors, the agency said, but it may also "discourage new private sector lending...and reduce the likelihood that Portugal will soon be able to regain market access on sustainable terms."

"[Moody's] utters what many were fearing – that a participation of the private sector will increase risk aversion in the market," says Stefan Kolek, corporate credit strategist at UniCredit.  

"[There is] talk of an Irish downgrade, described as imminent," says one gold bullion dealer here in London.

Moody's is the first of the three major ratings agencies to downgrade Portugal's debt to junk. 

Conversely, it is the only agency that has not declared its position on plans for private creditors to roll over Greek debt – Standard & Poor's and Fitch having both indicated that this would constitute default.

Over in the US, President Obama rejected a proposal on Tuesday to raise the federal debt ceiling for up to eight months. The US Treasury expects to hit the $14.3 trillion borrowing limit on August 2, with Congressional approval required to raise it.

Obama is due to meet Democrat and Republican leaders of Congress on Thursday.
"We need to come together over the next two weeks to reach a deal that reduces the deficit," said Obama on Tuesday.

"I'm happy to discuss these issues...but such discussions will be fruitless," said Republican John Boehner, speaker of the House of Representatives.

"The legislation the president has asked for – which would increase taxes on small businesses and destroy more American jobs – cannot pass the House."

"An increasing focus on US fiscal worries should...lead to safe-haven and diversification bids" for gold bullion, reckons UBS precious metals strategist Edel Tully.

In South Africa meantime workers in the gold mining industry are preparing to go on strike after the National Union of Mineworkers rejected a 4.5% pay rise offer on Tuesday. The NUM is asking for 14%, citing rising living costs such as food and electricity.

"It [is] important to be aware of the economic realities of the gold mining industry," said the Chamber of Mines in response.

"Production has been consistently declining and...the industry is facing high cost pressures such as electricity, wages, fuel, steel and other input costs."

The rising cost of mining gold bullion mean any falls in the gold price would risk some newly discovered deposits going unmined, according to Evy Hambro, managing director of the Blackrock Gold & General investment fund.

By Ben Traynor
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

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.

(c) BullionVault 2011

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 – and must be verified elsewhere – should you choose to act on it.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in