Gold and silver watching political “gangs”

In the Lead: “Gang Warfare”

In Brussels this morning, the “Gang of Two” (Angela Merkel and Nicolas Sarkozy) were expected to outline their joint position on how to address the Greek debt situation. In Washington this morning the “Gang of Six” proposal was still lacking detail on certain aspects of health care spending but these were expected to be made available soon. Greek PM Papandreou said that EU ministers are facing a “make-it-break” moment for where Europe and the Union might be headed next.

President Obama meanwhile has indicated that ahead of America’s own “make-or-break” moment due Aug. 2nd, he might give the idea of a short-term (just days’ worth) increase in the US borrowing limit if lawmakers could come to an agreement on a broad deficit-reduction program. As these various gangs’ meetings went, so did the ebb and flow of confused monies in the global financial market this morning. Ups and downs were noted in the euro, the dollar, bonds, precious metals, and equities on both sides of the Atlantic.

Gold prices opened with a near-$8 loss in New York as details began to emerge from Brussels that some sort of resolution to the Greek problem might be in the offing. One source signaled that the ECB might be ready to accept a technical Greek default and create a fresh financial package for Greece if in fact the EU governments will guarantee Greek bonds. Any de facto default would be kept at a minimum duration in order to keep markets calm. Up to this point, the ECB has not been in a position to accept defaulted Greek bonds as collateral in market operations.

Spot gold was quoted at $1,594.00 on the bid-side and the pitched battle for the $1,600 mark kept going as aggressive spec funds kept the bids coming and countervailed most of their profit-taking brethren overnight. The yellow metal traded in a range for from $1,592 up to $1,605.00 as neither side was apparently willing to give up too much ground and was seen awaiting more concrete news out of Brussels or Washington.

Silver opened on the weak side, losing 50-cents per ounce to start at $39.62 and the white metal’s traders were also seen duking it out within the $1.25 range that it traded in overnight. The exceptions in the metals’ complex this morning were platinum and palladium; both of them traded higher right out of the starting gate in New York. The world’s third largest platinum producer- Lonmin- announced that its production costs have risen substantially (11%), even as its production of refined metal touched 483,655 ounces (up 26%) due to previously occurring strikes at its mines in May.

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