Gold Gains as Eurozone Optimism “May Fade” Following Details
By: Ben Traynor
Oct 27, 2011
THE SPOT MARKET gold price rallied to $1725 an ounce Thursday lunchtime in London – 5.1% up from the start of the week – following a mid-morning dip.
Silver prices continued to see-saw around $33.50 per ounce – 6.7% up for the week so far.
Stock markets meantime surged throughout the morning following news of an agreement between Eurozone leaders at yesterday’s crisis summit.
Commodity prices also rallied strongly, while government bonds sold off.
“The optimism could soon fade, which could see participants once again adopt a risk-off stance,” warns Marc Ground, commodities strategist at Standard Bank.
“However, given gold’s close co-movement with equities recently (the last few days excluded), it is uncertain whether the metal will benefit from a market returning to risk aversion.”
The gold price “has come under some pressure,” adds Nikos Kavalis, commodities strategist at Royal Bank of Scotland.
“But [it] has been supported by good buying from private banks.”
Private sector creditors will take a nominal loss of 50% on their Greek bond holdings, Eurozone leaders agreed early on Thursday morning, following eight hours of negotiations.
“Together with an ambitious reform program for the Greek economy, the [50% haircut] should secure the decline of the Greek debt to GDP ratio with an objective of reaching 120% by 2020,” said the official Euro Summit Statement.
Banking sector representatives had previously offered to accept a haircut of 40%.