by Ben Traynor<\/p>\n
BullionVault<\/a><\/p>\n Monday 11 July, 08:30 EDT<\/p>\n <\/strong><\/p>\n Gold Hits New Euro, Sterling Records as Eurozone Emergency Meeting Discusses Italy’s “Unsustainable” Debt<\/strong> The Euro\u00a0gold price<\/a> hit a new record of \u20ac1092.12 per ounce at Monday morning’s London Fix<\/a> \u2013 a 1.5% jump from Friday afternoon’s fix.<\/p>\n The Sterling\u00a0gold price<\/a> meantime came in at \u00a3966.32 per ounce \u2013 a 0.7% gain from last Friday, and also a new record.<\/p>\n The\u00a0silver price<\/a> meantime jumped to $36.65 per ounce \u2013 down four cents from last Friday’s spot market close.<\/p>\n “Italy cannot afford to pay the interest rates it’s paying right now,” adds Andrew Bosomworth, fund manager at PIMCO, the world’s largest bond fund, adding that Italy’s debt will be “unsustainable” if interest rates remain at current levels.<\/p>\n “As yields rise and debt financing costs become even more exaggerated, the difficulties of containing the crisis become greater,” says Jane Foley, senior foreign exchange strategist at Rabobank.<\/p>\n Yields on Italian government bonds rose to 5.4% on Monday \u2013 up from just over 4% this time last year.<\/p>\n Italy’s stock market meantime fell sharply on Friday \u2013 with shares in its largest bank, UniCredit, down 7.8%.<\/p>\n Herman Van Rompuy, president of the European Council, called an emergency meeting Monday for officials dealing with the ongoing Eurozone debt crisis.<\/p>\n Among those invited to the meeting were Jean-Claude Trichet, president of the European Central Bank and Jean-Claude Juncker, chairman of the group of Eurozone finance ministers.<\/p>\n The Eurozone may have to double the size of its bailout fund \u2013 the European Financial Stability Facility \u2013 to \u20ac1.5 trillion to cover a potential crisis in Italy, according to German Die Welt, citing unnamed ECB officials.<\/p>\n Also in Brussels, European leaders are for the first time contemplating a Greek default, according to a report in Sunday’s Financial Times.<\/p>\n Options under consideration reportedly include lower interest rates on bailout funds and a program of buying back Greek government bonds.<\/p>\n “The basic goal is to reduce the debt burden of Greece,” the FT quotes a senior European official involved in negotiations.<\/p>\n Eurozone leaders are contemplating a selective Greek default “to save ammunition for later” says one\u00a0gold bullion<\/a> dealer here in London \u2013 referring to the potential crisis in Italy, the third largest economy in the single currency.<\/p>\n “The Eurozone sovereign debt crisis has the potential to generate major financial stresses should it end in sovereign default,” says a new report from research consultancy Oxford Economics, entitled\u00a0The Impact of Inflation and Deflation on the Case for Gold<\/a>.<\/p>\n The consultancy’s analysis predicts that the\u00a0gold price<\/a> should “perform especially strongly in more extreme economic scenarios featuring high inflation, a weak Dollar and elevated financial stress.”<\/p>\n The researchers also find that gold performs well in their deflation scenario.<\/p>\n “Large [gold] price swings aren’t to be ruled out due to the illiquidity of the summer holidays,” cautions Swiss precious metals refiner MKS.<\/p>\n “We would beware of the build-up of speculative short positions…[which are]well above last year’s average,” says Marc Ground, commodities strategist at Standard Bank.<\/p>\n “[This indicates]a market that is less supportive \u2014 which could see the\u00a0gold price<\/a> more vulnerable to shifts in investor sentiment.”<\/p>\n In New York meantime noncommercial “speculative” investors decreased their net long exposure to\u00a0gold futures<\/a> and options contracts \u2013 narrowing the gap between bullish and bearish positions \u2013 according to the latest data from the Commodities Futures Trading Commission.<\/p>\n Noncommercial investors increased their short futures and options positions by the equivalent of 5.7 tonnes of\u00a0gold bullion<\/a>.<\/p>\n Over in China \u2013 the world’s second largest gold market \u2013 consumer price inflation rose to 6.4% in June, up from 5.5% in May.<\/p>\n “The higher the reading in June, the better the chance for it to peak,” reckons Ting Lu, economist at Bank of America Merrill Lynch in Hong Kong.<\/p>\n Pork prices were the major driver behind inflation growth \u2013 rising 57.1% in the year to June.<\/p>\n Ben Traynor<\/p>\n BullionVault<\/a><\/p>\n Gold value calculator<\/a> |\u00a0\u00a0 Buy gold online at live prices<\/a><\/p>\n Editor of Gold News<\/a>, the analysis and investment research site from world-leading gold ownership service BullionVault<\/a>, Ben Traynor<\/strong> was formerly editor of the Fleet Street Letter<\/em>, 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.<\/p>\n
\nTHE U.S. DOLLAR<\/strong> gold price<\/a> climbed to $1550 per ounce just after midday in London \u2013 up 4.2% from the beginning of last week \u2013 while stocks and commodities plunged and US Treasury bonds rose after the president of the European Council called a crisis meeting to discuss Italy’s sovereign debt.<\/p>\n