Increasing worries about a possible Greek debt default undermined the jawboning offered by ECB President Jean-Claude Trichet yesterday and essentially relegated him to the role of a spectator in the crisis. The idea of a default (notwithstanding any likely rescues, should the apparently inevitable take place) kept up the pressure on the euro overnight albeit the dollar retreated a modest 0.10 on the index and was trading near 81.40 at last check.
As fear of a default morphed into expectations of a bailout, Greek bonds rose from their ashes for the first time in a fortnight and the euro also regained a modicum of composure. In fact, UBS analysts opined this morning that Greece will be knocking on the IMF’s door for help within days –perhaps, over the weekend. The dawdling might thus finally come to an end and the die will be cast. The common currency was last quoted at 1.339 against the greenback.
Against this background of uncertainties gold prices climbed to three-month highs and also set new peaks in euro and pound terms as speculators see a dearth of alternatives in an environment where their local beleaguered currencies might continue to pay next to nothing in terms of interest. Meanwhile, word is that China might allow the yuan to rise by about 3% this year. Now there’s something of a surprise, eh?
Any such revaluation’s salutary effects on U.S. exporters could be rather muted by the presence of import barriers which of course the move would not obviate. Can we consider this as a token of appreciation for Mr. Geithner delaying a report that calls China a currency ‘manipulator’ which was due for release last week?
“Gee, we don’t know, but the man just met with Vice Premier Wang”…will say some. Our own opinion is that the prospect of China possibly posting its first trade deficit in some six years in the wake of its gigantic commodities and consumer goods shopping spree, defused the U.S. finger-pointing about the undervalued yuan sufficiently to make the publication of the report moot for now.
Bullion prices rose to nearly $1160 the ounce ahead of the New York open this morning. The first quote of the day was showing an $1156.60 per ounce spot bid price, for a $5.40 gain. Silver was ahead by 24¢ at $18.30 the ounce.
Over in the noble metals complex, platinum advanced $2.00 to open at $1715 and palladium rose by $5 to the $507.00 level. No change was reported in rhodium, at $2700.00 the troy ounce. Resistance levels are cited as remaining at $1164 and $1175 while the $1145-$1150 levels should prove supportive.
Jon Nadler
Senior Analyst, Kitco Metals Inc. North America
Websites: www.kitco.com and www.kitco.cn
