So far Germany and France have made a joint statement about their trust in the ECB’s steps aimed at curbing the eurozone inflation. However, Angela Merkel still insists that emitting common euro bonds is not an efficient step at least until there is tighter fiscal integration within the eurozone.
Nikolas Sarkozy and Angela Merkel promise to work out and propose possible changes to the basic agreements during the forthcoming summit scheduled for Dec 9th 2011.
In the meantime, yesterday the T-bonds of 2 eurozone countries lost their investment rating. Fitch downgraded Portugal ’s rating while Moody’s Investors Service cut Hungary’s rating to junk. The ECB keeps taking steps to increase the borrowing terms for European banks from 2 to 3 years in order to prevent a liquidity crisis in the area.
It means that investors will keep looking for safe haven assets (including US T-bonds), thus withdrawing their capital from euro assets. The US stock market is expected to continue its downtrend.
The physical demand for precious metals is moderate. In particular, India, the world’s biggest consumer of gold, is expected to import much less than 3030 tons. The season of weddings in India, which is usually attended by mass purchases for gold, has failed to increase the demand so far.
Forecast: According to the Department of Commodity Trading, , gold prices will be under pressure. The closest targets are 1687, 1673. A break below 1673 will give way to 1644.
Silver may well test 31. If it is successful, the price may hit 30.30 and 30.
