Gold and Stock Rallies Fade, "We'll Solve the Crisis" say Euro Leader

By: Ben_Traynor

THE SPOT MARKET Dollar price to Buy Gold rose to $1694 an ounce Monday morning – the highest level since September 23 – before dropping back to roughly where it ended last week.

"[A gold price of] $1,650 should remain as good support with sovereign and physical bids coming in at that level," reckons one London bullion dealer.

The price to buy gold in Euros, by contrast, held onto most if its gains after hitting €39,335 per kilo (€1223 per ounce), reflecting a near-1% fall in the Euro against the Dollar this morning.

Silver prices hit a high of $32.66 per ounce – 1.2% down on last week's high – while commodities were broadly flat and US Treasury bonds gained.

European stock markets started the day strongly – with the FTSE at one point up 1.4% and Germany's DAX up 1.0% – though like gold in Dollars they too retreated before lunchtime.

"Too much uncertainty remains in the market," reckons UBS precious metals analyst Edel Tully in London.

"[There are] questions over issues such as guarantees of European sovereign debt, a Greek default and debt sustainability...while there is no rush to buy gold here, it is equally clear that investors who are long the yellow metal are not willing to let go of holdings either."

G20 finance ministers gave Eurozone leaders until the end of this week to reveal their strategy for tackling the Eurozone debt crisis, according to press reports on Monday.

"The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they've set for themselves," said Canada's finance minister Jim Flaherty on Saturday, the day the G20 meeting ended in Paris.

"We're aware of our responsibility," said German finance minister Wolfgang Schaeuble.
"We'll solve the problems in the Eurozone."

A spokesman for German chancellor Angela Merkel, however, said the search for a solution "surely extends well into next year".

Schaeuble today indicated that EU leaders may agree to raising banks' Tier 1 capital ratios to 9% – up from the 4% recommended under the Basel II regime, the set of accords published by the Basel Committee on Banking Supervision in 2004.

Over in New York, the net long position of bullish minus bearish gold futures and options contracts held by noncommercial – so-called 'speculative' – Comex traders rose for the second week running last week, gaining 3.5% in the week to 11 October.

"Much like in the previous week, the increase in the net position was mostly attributable to the decrease in speculative shorts," says Marc Ground, commodities strategist at Standard Bank.

"Given the modest nature of the past two weeks' improvement in the net position, we still feel that the speculative market remains cautious about gold's short-term prospects. However, the decline in speculative shorts is encouraging."

The Occupy Wall Street movement – which began last month when demonstrators pitched a tent outside the New York Stock Exchange to protest against the banking sector – has spread to other global financial centers.

Protesters began camping outside the London Stock Exchange on Saturday, hanging up a sign that reads 'Jail the Bankers'.

"I want a government that will not just pander to the banks...I want to see stricter regulation of the finance system," one told news agency Bloomberg.

One placard outside Australia's central bank meantime reads: "When I do it, it's counterfeiting. When the Reserve Bank does it, it's called Quantitative Easing." 

"[Occupy] Wall Street has a campaign to start asking questions about capitalism but this is not enough," said a protester in Hong Kong. 

"I want to tear down capitalism."

Elsewhere in Hong Kong, the Chinese Gold & Silver Exchange Society it launched its Yuan-denominated Kilobar Gold contract earlier today.

The world's first Yuan-denominated contract to buy gold outside of mainland China "can truly help promote the internationalization of the Renminbi [Yuan]," says Haywood Cheung, president of the 100-year-old CGSE.

"There's triple demand for this Yuan product...investors can enjoy the bull market in gold, the Yuan's appreciation and hedge gold denominated in other currencies against the Yuan."

By Ben Traynor
BullionVault.com

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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

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