Euro Spikes from 2-Month Low Following Greek Bailout
Story, Gold Deposits "Getting Harder to Find" says Barrick
PRICE FOR gold bullion on the wholesale market rose to $1730 an ounce this morning in
London, after drifting lower overnight, as the Euro jumped half-a-cent against
the Dollar following a report that the German government is considering a plan
to speed up the payment of bailout money to Greece.
"There had been a decoupling in the relationship
between gold and the Dollar in terms of the daily trading range, and now we are
seeing a readjustment," says LGT Capital Management analyst Bayram Dincer.
German tabloid Bild reports that the German government
is proposing to bundle the next three tranches of Greece's bailout into one
payment of around €44 billion, citing government sources. Greece has to meet a
€5 billion debt repayment this week.
Earlier in the day, stock markets and the Euro fell to
two-month lows after a public disagreement between policymakers over Greece and
news that Greece's next bailout tranche, worth €31.3 billion, will be delayed
for another week.
Greece's deadline reducing its debt-to-GDP ratio to
120% will be extended from 2020 to 2022, Jean-Claude Juncker, chairman of the
Eurogroup of single currency finance ministers, told reporters.
"In our view, the appropriate timetable is 120%
by 2020," countered International Monetary Fund chief Christine Lagarde.
"We clearly have different views [on whether to
give Greece more time]," she added.
Lagarde "appeared exasperated" with Juncker
at the press conference, the Financial Times reports.
The FT adds that the IMF has for months argued that
there should be a further write down of Greek debt, in addition to the
restructuring deal back in February that saw losses imposed on private sector
creditors.
In order for Greece to reduce its debt to 120% by
2020, "a much more drastic debt stock reduction (possibly north of €80
billion in total) will be required," says Goldman Sachs senior economist
Themistoklis Fiotakis.
"This seems politically infeasible at present. We
think a more likely outcome will involve some debt relief, continued official
sector funding...and a continued uncertain Greek debt profile [which will] hold
back a Greek recovery relative to a more decisive write-off."
Silver bullion meantime climbed to $32.67 an ounce, in line with where it started
the week, while other industrial commodities ticked lower and US Treasury bond
prices gained.
"The fiscal cliff is being priced in because it's
the biggest risk facing the market right now," says Priya Misra, head of
US rates strategy at Bank of America Merrill Lynch in New York, referring to
the combination of tax rises and spending cuts due at the start of next year
unless US lawmakers agree a deal to avoid them.
Here in the UK, inflation rose to its highest level
since May last month at 2.7%, official consumer price index data published Tuesday
show.
"The largest upward pressure came from university
tuition fees, followed by food and housing," the Office for National
Statistics said.
Fees paid by undergraduates have almost trebled in the
last year, after the government raised the cap on what universities can charge
from £3375 to £9000.
"Where do we go from here?" Scotiabank
economist asks Alan Clarke.
Onwards and upwards. Utility bill increases are
on their way. We've also got the effect of the US drought and increased food
prices to factor in...I don't think we're going to get anything like the 2%
[Bank of England] inflation target."
Inflation has been above the Bank's 2% target in every
month since November 2009.
"Growth for 2013 is likely to be revised
down," adds Chris Williamson, economist at financial information firm
Markit.
"The higher cost of living caused by the rise in
inflation will hit consumer spending [while]worries about the impact of
austerity and wider concerns about the Eurozone and US fiscal woes look set to
ensure that domestic demand, investment and exports all remain subdued."
Over in India, traditionally the world's biggest gold buying nation, rural gold sales during today's Diwali festival were hit
by this year's poor monsoon, the Economic Times
of India reports.
"Despite the weddings and traditional gold
dowries that are of high importance during this period, demand once again
stalled," adds a report from refiner Heraeus.
Retail gold bullion demand during Sunday's Dhanteras festival was however up 8.3% on
last year, according to the Bombay Bullion Association.
The Rupee is down 11% against the Dollar from its
level during last year's Diwali.
Gold mining firms are discovering gold at a decreasing rate despite spending a
record $8 billion on exploration last year, according to
Jamie Sokalsky, chief executive of world's largest gold producer
Barrick Gold.
"It's getting harder to find large deposits and
to get those deposits into production takes at least twice as long as it might
have taken a decade ago," Sokalsky told Bloomberg.
Ben
Traynor
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. Ben writes and presents
BullionVault's weekly gold market summary on YouTube and can be found on
Google+
(c)
BullionVault 2012
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