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Barclays Capital announced yesterday that it expects
the global macroeconomic environment
to continue to support gold prices in the near future. This comes at a time when the eurozone’s finance ministers
are struggling to contain
the fallout from the Greek debt crisis.
Greek citizens
have been rioting against
the European Union and International Monetary Fund’s austerity conditions attached
to loans to the Greek government, with riots in the streets of Athens and other major Greek cities and bitter
disputes among the nation’s
politicians. A parliamentary
vote on the passage of future spending
cuts – forced by socialist Prime Minister George
Papandreou – failed. However,
the eurozone’s finance ministers
came to an agreement in Luxembourg yesterday on terms for providing Greece with the fifth loan installment
of 12 billion euros from the EU and the IMF as part
of the bailout package granted
to the country in May 2010.
Further spending
cuts and extensive privatisation efforts are the
main preconditions for receiving
the next loan installments. The Greek Parliament is expected to vote on these proposals as early as next week. The austerity measures negotiated by the so-called Troika – consisting of EU
governments, the IMF and the European
Central Bank (ECB) – should result in savings of around 28 billion euros by 2015.
Some market observers think that the gold price will likely remain
in a narrow trading range
between $1,520 and $1,550 per troy
ounce until investors have greater clarity with regards the Greek situation. It is difficult to forecast what will happen
if a majority of the Greek
members of parliament rejected the Troika’s
conditions. According to the German
news magazine Der Spiegel, some official EU
sources are talking off-the-record about Europe facing its biggest
crisis since the Second
World War.
Gold and silver
are both becoming increasingly acceptable as financial
safe havens, with the monetisation of government debts around the world undermining people’s confidence in fiat currencies.
The US Federal Reserve has purchased
around $2.3 trillions-worth
of bonds since the middle of 2009, while the ECB has been buying outstanding sovereign bonds of highly-indebted eurozone
countries and accepting them
as collateral against fresh loans. This way the ECB hopes that defaults by Greece,
Portugal and Ireland can be
avoided and/or the damage mitigated.
Barclays analysts
see the dovish, easy-money approach the ECB has
taken since May 2010 as offering good support for gold prices.
Aside from the problems in Europe, Barclays thinks
that the deteriorating US
economic data will increase the pressure on the Fed to resort
to more money printing. Barclays’ short-term forecast for the development of
the gold price ranges between
$1,520 and $1,560 per ounce in Q4 of 2011.
Goldmoney.com
All
data and quotes sourced from Reuters. Published by GoldMoney
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