Gold and euro share sentiment over debt levels

In the Lead: “Maybe We Should Pay Greece With Bitcoin?”

Despite assurances to the contrary, holed-up EU leaders were seen preparing another less-than-comprehensive package that intends to address the seemingly interminable European debt crisis. While only halfway through the lengthy meeting, the region’s financial and political managers offered some hope that markets might be presented with something to bite into in terms of proposals and solutions by the middle of this week. On the other hand, the teams also made it clear that the ECB’s resources (read; its balance sheet) would not be called into “duty” insofar as the expansion of the EFSF is concerned. The IMF’s resources (and perhaps China’s) might yet be needed to be tapped, depending on what is ascertained at the next such working meeting.

Another thing that was also made fairly clear by meeting participants as of this morning is that Mr. Berlusconi was handed something during the meeting; a friendly little “note” from Ms. Merkel that in effect warned him that Italy cannot count on mountains of money from its friends unless it pedals hard to do something about debt levels near 120% of GDP. Little mounds of money, perhaps, but not unlimited piles of same. No, go home and tighten that Gucci belt, Signore.

The summit that commenced this weekend is now the thirteenth time some of these various folks have gotten together to try to estimate, contain and resolve the mushrooming of the deterioration of Greek (and certain other) debt and the region’s banking sector. True-blue Euro-friend China once again expressed confidence that (perhaps for its own sake as well) a solution or five might be found at the conclusion of this gathering. Let’s see if thirteen can be a lucky number.

Meanwhile, China’s Premier Wen has once again come out and urged his countrymen and women to combat rising food and housing prices in order to sustain growth and social stability. Recent reports placed China’s growth at the 9.1% level; the slowest since 2009. Inflation, meanwhile, was still above the 6% mark in September. Social “stability” on the other hand, might be a tough nut to deal with for Mr. Wen. Bloomberg reports that in a stunning reversal “of one of the core principles of the Communist Revolution, in which Mao Zedong won the hearts of the masses by redistributing land from rich landlords to penniless peasants, powerful local officials are snatching [that land] back, sometimes violently, to make way for luxury apartment blocks, malls and sports complexes in a debt-fueled building binge.”

The euro initially fell as traders were less than pleased with the mention of the ECB not playing a role in the yet-to-be-announced plan, but then, later during the course of last night, optimism prevailed as at least something that the markets might find meaningful will be unveiled by Wednesday. If it manages to hold on to its gains, the common currency will complete five days of gains. Gold on the other hand, might complete two of the same at the end of today. Bullion lost nearly 3% last week as uncertainties continued to unsettle specs and investors and buffeted the commodities’ space.

Commodity prices rose this morning along with the levels of optimism surrounding the Euro-debt summit and along with the region’s common currency. Gold and the euro have been BFFs of late, so the yellow metal also gained in value in the back of the warm/fuzzies that were seen emanating from the crisis meeting. The irony that gold would gain because a Greek default or European banking sector “accident” would be averted is not lost on some traders. It is one thing for industrial metals to pick up value as perceptions that an economic contraction might not take place if debt solutions are found; it is another, for a so-called “crisis hedge” to also rise because a crisis…might not happen.

Monday’s New York spot metals’ dealings opened with assorted gains that ranged from a strong 3.7% for copper to about a tenth of that for silver. Gold was bid at $1,656 and showed a gain of $14.20 per ounce while the white metal climbed one dime to reach $31.51 the ounce. Those initial gains in gold moderated somewhat after the first hour of trading action. The noble metals advanced more robustly, with platinum rising $21 to the $1,532 level and with palladium gaining $17 to reach $629 the ounce. No changes were reported in rhodium which was still bid at $1,625 this morning.

The much-touted (by various newsletter vendors) upcoming Indian festival season may end up letting down those who look to such calendar-related gold demand to boost the market. The Gulf Times reports that gold “love trade,” i.e., purchases by locals motivated by the festival calendar, have been forecasted to come in at the “moderate” level as opposed to the “spectacular” one as high gold prices continue to be reflected in the price tags visible in India’s jewelry showrooms.

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