Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold "Seeing Benefit from Safe Haven Demand" as "Political Void" sees Italian Debt Yields Soar

Commodities / Gold and Silver 2011 Nov 09, 2011 - 09:18 AM GMT

By: Ben_Traynor

Commodities

Best Financial Markets Analysis ArticleU.S. DOLLAR gold bullion prices jumped to $1797 per ounce Wednesday lunchtime in London – more than 3% up from the same point a week earlier – as the European debt crisis continued to engulf Italy.

Silver bullion also rallied around lunchtime – though it remained just below $35 per ounce, where it started today's London session.


Italian 10-Year bond yields meantime breached 7.4%, following Wednesday morning's announcement by clearing house LCH Clearnet SA that it will raise the amount of margin collateral Italian debt traders must posts against potential losses.

Italian 10-Year spreads over German bund yields hit 520 basis points (5.2 percentage points) – while spreads over US Treasuries approached 500 bps – as US, UK and German government bond prices all gained.

"The upwards pressure on Italian bond yields and concern generally for peripheral EU countries has increased the demand for safe haven assets and gold has benefited from that," says James Steel, New York-based precious metals analyst at HSBC.

The Euro dropped 1.5% against the Dollar this morning, while Euro gold bullion prices climbed to €42,322 per kilogram (€1316 per ounce) – over 5% up on the same time last week.

European stock markets meantime sold off heavily, with the FTSE down 1.9% by Wednesday lunchtime – while Germany's DAX was off 2.7%.

Gold bullion briefly breached the $1800 per ounce mark during Tuesday's US session – before falling 1.4% in a little over two hours following news that Italian prime minister Silvio Berlusconi is to step down after Italy's parliament approves new austerity measures. 

Although it won Tuesday's key budget vote, Berlusconi's government was backed by only 308 out of 630 members – with opposition members choosing to abstain – suggesting it has lost its majority.

Italy's president Giorgio Napolitano favors creating a national unity government along the lines of that being negotiated in Greece, according to news agency Reuters. Berlusconi, however, said Tuesday that the only option is a new election.

Over in Athens, Greece was still without a new prime minister Wednesday lunchtime, as politicians continued a third day of negotiations.

"Southern Europe steps into a political void," says one London gold bullion dealer.

Elsewhere in Europe, Spain's two largest lenders – Banco Santander and Banco Bilbao Vizcaya Argentaria – have announced changes to the way they calculate risk-weightings on their assets, following calls from European regulators for banks to maintain higher core capital ratios of around 9%, newswire Bloomberg reports.

So-called risk-weighted asset optimization allows banks to increase capital ratios without selling assets, reducing lending or asking shareholders for more money.

"By allowing sophisticated banks to do their own modeling, we are allowing the poacher to participate in being the gamekeeper," says Adrian Blundell-Wignall, deputy director for financial and enterprise affairs at the Organisation for Economic Co-operation and Development.

"That risks making core capital ratios useless."

"It's probably not the highest-quality way to move to the 9% ratio," agrees Neil Smith, Dusseldorf-based bank analyst at German bank West LB.

Other European banks have confirmed they intend to use the practice to reach the 9% threshold – including Germany's Commerzbank and Italy's Unione di Banche Italiane – while Lloyds and HSBC say they have already cut risk-weighted assets by changing models.

"European banks account for more than 50% of international bank lending in all major regions of the world bar Asia, where latest data puts it at just under 45%," says a note from Standard Bank analysts Steve Barrow and Jeremy Stevens.

"If they scale back significantly the contagion effects could be substantial. In fact, this could be more damaging to the rest of the world than the more 'traditional' view of contagion in which recession—and falling import demand—are seen as the main threats to non-European countries...[especially as European banks] seem most keen to slim down Dollar lending as they strive to meet new capital requirements."

Chinese consumer price inflation meantime fell to 5.5% last month – down from 6.1% in September – according to official data published Wednesday. Producer price inflation fell even more sharply – down from 6.5% to 5.0%.

"The balance of risk for the PBOC [China's central bank] and State Council is likely shifting to growth and away from inflation," reckons Tim Condon, Singapore-based head of Asian economic research at ING.

"Lower inflationary pressure leaves room for further policy fine tuning," adds Zhang Zhiwei, chief economist China at Nomura in Hong Kong.

"The PBOC has already marginally loosened liquidity by open market operations in October...we expect this type of fine-tuning to continue, but [reserve requirement ratios] and interest rates will be kept unchanged for the rest of 2011."

China's central bank has raised interest rates five times since last October – the last hike coming in July, when the one year deposit rate was raised to 3.5%.

Over in New York, the world's largest gold ETF, the SPDR Gold Trust (ticker GLD), has seen a net inflow over the past week. The gross tonnage of gold bullion held to back GLD shares rose to 1264.1 tonnes yesterday – a 1.7% rise from this time last week.

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.


© 2005-2019 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