Gold rebuilds the wall of worry
By: Clif Droke
Gold has come into its own since October as traders continue to hang on every word coming out of Europe. Investors have breathed a collective sign of relief in recent days as Europe’s financial ministers plan to unveil a new rescue fund next month. In the meanwhile Italy and Greece are left to deal with their own debt crises until then. Greece must provide written acceptance of bailout terms before it receives its next 8 billion euro loan installment.
European officials are also consulting with credit ratings agencies over options for increasing the rescue fund’s 440 billion euro guarantee into as much as 1 trillion euros. “In the end,” wrote the Wall Street Cheat Sheet, “many investors believe Europe will resort to money printing to ‘solve’ the sovereign debt crisis.” As we’ve discussed in recent reports, gold therefore has a dual impetus to propel its recovery: fear of the unknown in regard to the euro zone crisis and loose central bank monetary policy in response to the crisis.