By From Adrian Ash
Stock-Markets as €85bn Irish Bail-Out Branded “Vicious”
THE PRICE OF GOLD slipped against the Dollar but held steady vs. the Euro in London on Monday, reversing an earlier rally as the Euro slipped to a new 9-week low to the Dollar following the weekend’s €85 billion rescue package for Ireland, agreed with the International Monetary Fund and European Union.
Irish banking shares rose sharply, but government bonds were little changed on the news, with the yield on Spanish 10-year debt continuing to trade near all-time record highs over comparable German bonds.
European stock markets fell, and silver prices gave back an early 1.8% jump, but crude oil rallied above $84 per barrel.
New data showed a decline in Eurozone industrial confidence, plus a decline in the UK’s money supply.
“It is decision time for year-end positioning,” writes UBS strategist Edel Tully, but “as Eurozone funding worries are not going to go away, it is against the Euro that gold should be gauged.”
“Gold outperformed the industrial metals last week,” says Mitsui’s London team, “as its safe haven appeal lay in stark contrast to the liquidation on equity bourses over growth concerns.”
Global stock markets have lost $2.3 trillion in value this month, Mitsui notes. The Dollar gold price stood unchanged from Oct. 31st at lunchtime today in London, trading just shy of $1360 an ounce.
Versus the Euro, gold stood 6.0% higher for November so far, re-touching early Nov.’s 5-month high above €33,200 per kilo.
“This is not a rescue plan. It is the longest ransom note in history,” writes Irish Times‘ columnist Fintan O’Toole today, calling the near-6% interest rate agreed on the joint IMF-EU loans “viciously extortionate”.
“Do what we tell you and you may, in time, get your country back.”
Dublin’s opposition parties all said they will vote against the government’s austerity Budget – a key part of the EU-IMF bailout – on Dec. 7th.
The €85 billion EU-IMF bailout package for Ireland announced last night was roundly condemned by the Opposition parties who are now all likely to vote against the Budget on December 7th.
Fine Gael, Labour and Sinn Féin also attacked the rescue’s use of €10 billion from Ireland’s €24.5bn National Pension Reserve Fund.
The Fianna Fáil government last night put aside a further €35bn of public money to buoy the Irish banking sector, vowing to nationalize Allied Irish Banks (AIB) by the end of Feb.
“Gold usually shines in a crisis,” writes Fortune columnist Colin Barr. “But thanks in large part to changing views of China, the problems swirling in Europe and Korea have barely budged gold prices.”
Food-price rises have compounded expectations for tighter monetary policy in China – the world’s fastest-growing economy and its No.2 gold consumer – where cash depositors currently get 2% below the rate of inflation in annual interest.
“One reason China is possibly dithering on raising rates is because it wants to discourage hot money inflows into the region,” says the FT‘s Alpha blog, however, “since all they do is cause China to print more domestic money of its own.”
The People’s Bank of China said today that it spent CNY519 billion in October absorbing inflows, swapping the equivalent of $78bn for foreign currencies held by domestic citizens and business, and issuing Yuan-denominated bonds to try and mop up the extra money thus created.
That was a sharp rise from Sept.’s CNY290bn, and the largest monthly total since April 2008.
Meantime in India, “In October we exceeded the [total] 2009 import levels,” says Manikbhai Dolakia, a bullion trader in Munbai’s Zaveri Bazaar, speaking to MineWeb about the 624 tonnes of gold bullion officially imported to the world’s No.1 gold market between Jan. and last month.
“Consumer demand has been so high and continues to be, despite the high prevailing price of gold.”
Adrian Ash
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Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
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