EU Debt Contamination Deepens in Greece, Portugal and Ireland – Gold Just 2% From Record Nominal High

Gold and silver are flat in US dollars but higher in euros this morning. Trade is thin with the UK and US markets closed for spring holidays. Gold and silver were 1.75% and 8% higher last week and the precious metals and especially gold appear to be on solid footing due to the continuing debt crisis in Europe and concerns about a slowdown in the US and global economy. 

 
Cross Currency Rates 

Despite gold being only some 2% away from the record nominal highs seen at the end of April ($1,563.70/oz), sentiment remains lackluster at best with little or no coverage of gold in the international financial press and media over the weekend. 

 
Gold Bullion in US Dollars – 60 Days (Daily) 

Speculative sentiment remains highly muted with the investment public not participating in the gold market. Indeed, the majority of the public’s only experience of the gold market is when they have imprudently sold their gold jewellery to the thousands of new cash for gold merchants seen globally. 

There are a tiny minority of more risk averse individuals and people who understand the importance of gold as a form of financial protection who continue to allocate funds to gold. 

In the last two weeks we have experienced a lot of sell orders and the ratio of sell to buy orders has been the highest since our foundation in 2003. Value buyers emerged last week but much of the buying was by existing clients adding to their holdings. 

The threat of sovereign default and contagion increases by the day. 

Greece is facing the threat of further severe austerity measures and a plan for unprecedented outside intervention including in the collection of tax and wholesale privatization of Greek state assets. The severity of the plan and the fact that it would in effect spell the end of Greek sovereignty and a forced move towards a European fiscal union may lead to its rejection by opposition Greek parties who may seek a fairer alternative. 

 
Portugal Government 10 Year Note – 2 Years (Daily) 

Greece is just one of the sovereign debt crisis facing the Eurozone. Portugal and Ireland are bracing for debt crisis contagion to reach their shores and in both countries the crisis is deepening. 

Portuguese bonds have come under heavy selling pressure again this morning with 10 year bonds rising to 9.822% and two-year note yields were 21 basis points higher at 11.53% this morning. The spread or yield difference between German 10-year bunds and Portuguese securities of a similar maturity widened to a record over 678 basis points in London this morning. This is the highest since Bloomberg began collecting the data in 1997. 

 
Ireland Government Bond – 10 Year (Daily) 

In Ireland, Transport Minister Leo Varadkar sparked alarm and confusion over the weekend when he said the government may need further funding from the European Union and IMF next year as Ireland will be shut out of bond markets for 2012 and possibly even in 2013. 

Irish 10 year bond yields surged over 11% last week and remain over 11% at 11.07% this morning. 

Punitive “bail outs” have clearly not worked and have simply managed to transfer massive debts from profligate banks to western nations taxpayers who were already struggling with very high debt levels. 

A continuation of these misguided policies makes a second more dangerous phase of the global debt crisis increasingly likely and means that diversification into gold remains prudent and safe haven demand for gold will remain robust for the foreseeable future. 

Gold

Gold is trading at $1,536.10/oz, €1,075.62/oz and £932.95oz.

Silver

Silver is trading at $37.97/oz, €26.59/oz and £23.06/oz.

Platinum Group Metals

Platinum is trading at $1,798.20oz, palladium at $756/oz and rhodium at $2125/oz. 

News

(Bloomberg) — Silver Futures Climb, Gold May Advance on Europe Debt, Inflation Concerns 
http://www.bloomberg.com/news/2011-05-30/silver-futures-climb-gold-may-advance-on-european-debt-conerns-inflation.html 

(MarketWatch) — futures fall, but silver moves higher 
http://www.marketwatch.com/story/gold-futures-fall-but-silver-moves-higher-2011-05-29?link=MW_latest_news 

(Reuters) — Gold steady on Greece debt fear, soft U.S. data 
http://uk.reuters.com/article/2011/05/30/markets-precious-idUKL3E7GU01120110530

(Bloomberg) — Euro Weakens on Greek Debt Concerns 
http://www.bloomberg.com/news/2011-05-30/euro-weakens-on-greece-debt-crisis-concerns-oil-falls-kiwi-strengthens.html

Commentary

(ZeroHedge) — The Greek "Ultimatum": Bailout (For The Bankers) And (Loss Of) Sovereignty 
http://www.zerohedge.com/article/greeces-ultimatum-bailout-bankers-or-loss-sovereignty 

(NY Times) — Utah Law Makes Coins Worth Their Weight in Gold (or Silver) 
http://www.nytimes.com/2011/05/30/us/30gold.html 

(MarketOracle) — Gold Going Parabolic This Summer 
http://www.marketoracle.co.uk/Article28266.html 

(Armstrong Economics) — The End of Time 
http://www.10sigma.com/files/The%20End%20of%20Time-Part%20I%2005-22-2011.pdf 

(International Business Times) — Why gold demand is surging in China? 
http://www.ibtimes.com/articles/153929/20110529/chinese-gold-demand-central-bank-gold-us-dollar.htm 

(True Economics) — Dr Constantin Gurdgiev: A note on my appointment to GoldCore 
http://trueeconomics.blogspot.com/2011/05/280511-note-on-my-appointment-to.html

Mark O'Byrne

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