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
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Eurozone Lights a Fire Under Gold and Silver

Commodities / Gold and Silver 2011 Oct 10, 2011 - 10:59 AM GMT

By: Eric_McWhinnie

Commodities

Just three months after passing a Euro stress test with flying colors, Belgium has agreed to buy the local consumer-lending unit of Dexia for 4 billion euros ($5.4 billion), and will guarantee 60% of a so-called bank to set up for Dexia’s troubled assets. The bailout was inevitable as European sovereign debt worries caused the bank’s short-term funding to vanish. Dexia’s agreement to nationalize its Belgian banking division and receive state guarantees paves the way for other eurozone governments to provide rescue packages to strengthen banking sectors.


“Dexia is not an isolated problem,” said Cor Kluis, a Netherlands-based analyst at Rabobank International. “The question for all investors in Europe is how politicians are going to handle this, and what they want to see is a coordinated and professional solution. That would be a good opportunity to restore calm.” The markets cheered the move as investors realized that governments around the world will print as much money as necessary to handle the broken financial system. The Dow surged over 200 points as every Dow component climbed higher. At the open, gold futures for December climbed more than $30 to reach $1670, while silver futures surged more than $1.00 to hit $32.

Hot Feature: What Does the Unemployment Picture Mean for Precious Metals?

“The three governments (Belgium, France, and Luxembourg) confirm they will take all the necessary measures to ensure the depositors’ and creditors’ safety,” according to an e-mailed statement from Belgian Prime Minister Yves Leterme’s office. As other governments around the world use similar approaches, gold and silver will continue to rise. While governments consider the nominal value of deposits important, precious metal investors consider the relative value of their currency important. German Chancellor Angela Merkel and French President Nicolas Sarkozy have both pledged to have a plan in place within a month to recapitalize European banks, replacing a 12-week-old rescue plan that has yet to be implemented. UK prime minister David Cameron is also urging European leaders to take a “big bazooka” approach to resolving the eurozone crisis. A big bazooka could light another fire under gold and silver prices in the coming weeks and months as investors seek shelter from devaluing currencies.

As the eurozone shows progress towards stabilizing the euro, the US dollar is taking a hit. The dollar fell more than 1.5% in morning trading, which also gave precious metals a boost. With countries around the world preparing bailout packages, stimulus programs, and devaluing currencies, some are turning to the long-term safe haven status of gold. Recently, the Dutch asked their central bank, DNB, about their gold holdings. They asked, “What is in your opinion on the function of the gold stock?” The central bank replied, “DNB’s physical gold holdings function as the ultimate reserve and anchor of trust in times of financial crisis. Further, gold is being held for diversification reasons.” Individual investors concerned with the global debt crisis should consider precious metals for the same reason.

Going forward, debt ridden banks and countries will continue to give investors a reason to diversify into gold and silver. In the past 24 hours, in addition to Dexia, two more banks were nationalized. Rueters reports, “Greece’s central bank said on Monday it activated a bank rescue fund to save Proton Bank,effectively nationalizing the small lender that is under investigation for possible violation of the country’s money-laundering laws.” Bloomberg reports on nationalized bank number two, “Max Bank A/S became Denmark’s first insolvent lender to test a bank package designed to sidestep the country’s bail-in laws after the state was able to find a buyer and avert senior creditor losses.” Investors must wonder, who is next to fall, and how high will it send gold and silver?

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

By Eric_McWhinnie

http://wallstcheatsheet.com

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors


© 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