Eurozone Debt Crisis Deepens Sending Euro Lower and Gold to New Record at EUR 1,080/oz

The euro, global equities and bonds in peripheral Eurozone countries are all lower this morning on heightened concerns about the debt crisis in the Eurozone. The euro has fallen against all currencies and is now at a record low against gold at EUR 1,080.21/oz. Silver is lower against most currencies but is higher against the Australian dollar and the euro ( EUR 24.80/oz).


Cross Currency Rates

Greece’s 10 year government debt has surged to 16.98%, Portugal’s to 9.6% and Ireland’s to a new record at 10.76%. The yield on Italian 10-year government debt is up 9bp to 4.85% after S&P cuts its rating outlook on Italy’s sovereign debt to “negative” from “stable”. The Spanish 10 year bond has risen 11 basis points to 5.57%.

Equity markets in Europe have followed their Asian counterparts lower. Asian equities fell due to Eurozone debt concerns but also inflation concerns and the risk that the US economic recovery is faltering. Italy’s stock market (FTSE MIB) is down 3% while Spain’s IBEX is down 1.7%.


Gold in Euros – 30 Day (Tick)

Besides sovereign debt risk, gold is also being supported by geopolitical risk as seen in the increasingly unstable nuclear armed Pakistan where armed militants attempted to take over Pakistan’s naval air force headquarters.

There is increasing tension between the U.S. and Pakistan after what the U.S regards as Pakistan’s failure or collusion regarding Osama Bin Laden.

China has increasing economic and military ties and interests in Pakistan and has vowed to standby Pakistan and has called on the world to respect Pakistan’s sovereignty.

Separately, in an interview with the Financial Times on Saturday, Henry Kissinger has warned of a world war involving Pakistan and India.


Gold in Euros – 1 Year (Daily)

The eruption of Iceland’s Grimsvotn volcano is leading to concerns about the economic impacts on the aviation industry and wider impacts on consumer confidence on an already fragile European economy.

SILVER

Demand for silver bullion in China remains robust with Chinese silver imports in April at 339.4 metric tonnes, according to data released by the Chinese customs agency today.

This compares to 302.09 metric tonnes in April 2010 or an increase of over 12% from the same month last year. It compares with silver imports of just 132.5 and 127.3 metric tonnes in April 2009 and April 2008 respectively.

This shows that the record Chinese demand for silver bullion seen in 2010 is continuing in 2011 and higher silver prices are not deterring Chinese buyers.

China imported 3475.4 tonnes of silver bullion in 2010 up a massive fourfold from 2009 when imports were just 876.8 tonnes. Importantly, China was a net exporter of silver bullion up until 2007.

Gold

Gold is trading at $1,508.80/oz, €1,078.64/oz and £935.81oz.

Silver

Silver is trading at $34.64/oz, €24.76/oz and £21.48/oz

Platinum Group Metals

Platinum is trading at $1,747oz, palladium at $720/oz and rhodium at $1875/oz.

News

(Reuters)–Gold rises to near two-week top on euro zone debt woes
http://www.reuters.com/article/2011/05/23/markets-precious-idUSL3E7GN0B420110523

(Bloomberg)–Gold May Advance as European Debt Concern Boosts Demand for Haven Assets
http://www.bloomberg.com/news/2011-05-23/gold-may-advance-as-european-debt-concern-boosts-demand-for-haven-assets.html

(Associated Press)–Gold, silver coins to be legal currency in Utah
http://www.google.com/hostednews/ap/article/ALeqM5iVwtsZHKs7A_uQEDwUlnH2P1jJ3Q?docId=fdc78f4b243f4e1facc5982a1fc02836.html

(Bloomberg)–Shanghai Gold Exchange Planning to Start ETFs, Chairman Wang Zhe Says

http://www.bloomberg.com/news/2011-05-21/shanghai-planning-gold-exchange-traded-funds-to-tap-rising-demand-in-china.html

Commentary

(The Telegraph) — Chinese inflation helps gold to shine brightly
http://www.telegraph.co.uk/finance/commodities/8529522/Chinese-inflation-helps-gold-to-shine-brightly.html

(FT) — Angus Murray: Believer in gold and real assets
http://www.ft.com/intl/cms/s/0/f7732d0c-844f-11e0-afcb-00144feabdc0.html

(FT) — Robbery? But the cash is still in the bank…
http://www.ft.com/intl/cms/s/2/933fea12-8302-11e0-85a4-00144feabdc0.html

(Zero Hedge) — Things That Make You Go Hmmm…. Such As The CFTC’s "Endless" Investigation Of Silver Manipulation
http://www.zerohedge.com/article/things-make-you-go-hmmm-such-cftcs-endless-investigation-silver-manipulation

(The Wall Street Journal) — Should America Sell Its Gold?
http://online.wsj.com/article/SB10001424052748703421204576331364065189624.html  

Mark O'Byrne

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