by Ben Traynor<\/p>\n
BullionVault<\/a><\/p>\n Wednesday 17 August,08:30 EDT<\/p>\n <\/strong><\/p>\n Gold Hits $1795, “Useless” Eurozone Leaders would Cut Funding to Govts Disobeying Brussels <\/strong><\/p>\n THE DOLLAR<\/strong> gold price<\/a> rose to a high of $1795 an ounce Wednesday morning in London \u2013 1.1% off last Wednesday’s record \u2013 before selling off towards lunchtime.<\/p>\n Broad commodity prices rose, while stock markets dropped following Tuesday’s Franco-German summit in Paris.<\/p>\n “Downside support [for the\u00a0gold price<\/a>] is found at $1742,” say technical analysts at bullion bank Scotia Mocatta.<\/p>\n “Our big picture view is that while $1687 holds, the risk is for a measured move objective of $1932.”<\/p>\n Silver prices<\/a> broke the $40 per ounce mark around lunchtime, hitting $40.38 \u2013 a 3.4% gain for the week so far.<\/p>\n “Gold is still the most appealing asset in the short run, while uncertainty over the Eurozone’s future will not evaporate overnight,” says VTB Capital analyst AndreyKryuchenkov.<\/p>\n Eurozone governments will not start issuing so-called Eurobonds \u2013 join-government debt instruments collectively back by all members of the single currency. Nor will the European Financial Stability Facility \u2013 the Eurozone’s \u20ac440 billion bailout fund \u2013 be enlarged.<\/p>\n Those were the conclusions of Tuesday’s meeting between French president Nicolas Sarkozy and German Chancellor Angela Merkel.<\/p>\n “Eurobonds can be imagined one day,” Sarkozy told reporters after the meeting.<\/p>\n “But at the end of the European integration process, not at the beginning.”<\/p>\n Merkel described Eurobonds as “last resort” that are not required at this point.<\/p>\n The two leaders instead advocated closer integration of Eurozone members’ fiscal policies \u2013 with sanctions for those that breached rules on deficits and debt limits \u2013 and proposed an ‘economic government’ for the single currency area headed by current European Union president Herman van Rompuy.<\/p>\n In a joint letter to Van Rompuy Wednesday morning, Merkel and Sarkozy suggested a freeze on EU structural funding \u2013 intended to grant financial assistance and resolve economic and social problems \u2013 for members who fail to comply with Brussels recommendations on deficit reduction.<\/p>\n Currently 14 of the 17 Eurozone countries \u2013 including France and Germany \u2013 are subject to the European Commission’s “excessive deficit procedure”. EDP is triggered when a deficit exceeds 3% of gross domestic product, or when total government debt breaches 60% of GDP.<\/p>\n Merkel and Sarkozy also proposed a levy on financial transactions \u2013 known as a Tobin tax.<\/p>\n “Again, European leaders fail to provide a proper answer to the right question,” says a note from French investment bank Natixis.<\/p>\n “A European Tobin-like tax is not the solution.”<\/p>\n “The market felt [the meeting] to be useless [which] brought gold higher,” said Swiss\u00a0gold bullion<\/a> refiner MKS on Tuesday.<\/p>\n Since the first Greek bailout in May 2010, the Euro\u00a0gold price<\/a> \u2013 which hit a high of \u20ac1248 per ounce this morning \u2013 is up more than 30%.<\/p>\n On the currency markets, the Swiss Franc shot up 2.6% against the Euro on Wednesday morning, prompting the Swiss National Bank to repeat its assertion that the Franc is “massively overvalued”.<\/p>\n The SNB announced that it is expanding liquidity supply for the second time in a week. The central bank aims to increase banks’ instant access deposits with the SNB by 67% to SFr200 billion.<\/p>\n “The SNB reiterates that it will, if necessary, take further measures against the strength of the Swiss Franc,” said an official press release.<\/p>\n The currency’s rise this morning saw the Swiss Franc\u00a0gold price<\/a> fall 2.3% to SFr1400 per ounce.<\/p>\n The Bank of England meantime refrained from expanding its asset purchase program \u2013 known as quantitative easing \u2013 at its nine-member Monetary Policy Committee meeting earlier this month, with only one of the nine members voting for expansion, minutes published Wednesday reveal.<\/p>\n Other members, however, “considered whether there was a case for increasing the degree of monetary stimulus by undertaking a further programme of asset purchases. Those members concluded that the case was not yet strong enough… further asset purchases might nonetheless become warranted were some of the downside risks to materialise.”<\/p>\n The MPC voted unanimously to keep rates on hold at 0.5% \u2013 where they have remained since March 2009. At every other MPC meeting this year, at least two members have voted for a rate hike.<\/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