EU Debt Restructuring Leads to Bailout Euphoria / Silver to Double to $100 Says Citigroup

July 22, 2011

Bailout euphoria has returned to markets with Asian and European stock indices rising on renewed risk appetite.

Gold has recovered from yesterday’s slight sell off (0.6% in USD) and the firm gold price in all currencies suggests that market euphoria is again misplaced. Gold is down only 20 euros per ounce in the last 24 hours. Gold is trading at USD 1,596.10, EUR 1,108.1, GBP 978.50 and CHF 1,310.10 per ounce.

Cross Currency Rates

Along with stocks, European bonds are being bought with gusto. Yields in Greece have plummeted while yields in Ireland and Portugal have fallen sharply. German bunds have been sold and the yield on the German 10 year has risen from 2.5% to 2.88% since last Tuesday (July 12^th).

The failure to address the risk of insolvency in Greece, Portugal and Ireland means that the risk of contagion has been delayed but remains.

Mark O'Byrne

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