Several market forces are pushing the price of gold down today, as concerns over Ireland's sovereign debt has the euro under pressure, pushing up the value of the U.S. dollar, while pent-up concern over the probably of Asian countries raising their interest rates become a reality, as South Korea was the first to take the action to battle inflation. Most thought China may first take that step.
South Korea raised their interest rates by 25 basis points to 2.50.
The U.S. dollar index rose in response to the weakened euro, gaining $0.79, increasing to $79.14 earlier in the day.
Interest rates became a major concern when China revealed their consumer price index was higher than expected, reaching 4.4 percent, generating speculation they would raise interest rates to combat inflation.
Gold prices will probably remain under pressure until the interest rate scenario plays out, the continual uncertainty surrounding the European Union sovereign debt crisis is handled.
The problem with the European sovereign debt crisis is there appears to be a lot of shady dealings and data still being presented as the condition of some countries, as Greece has again stated their numbers are probably lower than believed concerning their deficits.
Socialism isn't sustainable, and these countries better stop their entitlement programs and mentality before the region becomes an economic graveyard. They're already well on the way.
Once the Ireland situation is taken care of, or at least a bailout is accepted by them, the euro will move stronger against the U.S. dollar, helping gold to rebound again.
But there will still be the interest rate scenario left to play out, which when Asian nations announce they're going to raise them, will cause pressure to again be brought on gold prices in response.
It looks like we're going to end up having opposite economic pressure on gold, which will probably result in a lot of volatility until the narrative is more clear.
Spot gold prices have fallen by over $26 an ounce as of about 2:00 PM EDT.
Showing posts with label Ireland Sovereign Debt Crisis. Show all posts
Showing posts with label Ireland Sovereign Debt Crisis. Show all posts
Tuesday, November 16, 2010
Wednesday, August 25, 2010
Ireland Bonds Downgraded by Standard & Poor's
It was only a matter of time before the extraordinary risk inherent in the European Union was brought to the forefront of economic news, and it happened on Tuesday when Standard & Poor's downgraded Ireland's bond ratings, following up on the same downgrade on Irish bonds made by Moody's (NYSE:MCO) in July.
Reasons given for the downgrade were the enormous costs associated with supporting the financial system of the country.
Irish bonds were slashed one level to "AA-" from "AA." A negative outlook was also assigned. The short-term rating was maintained at "A1+."
S&P said the increasing costs will "further weaken the government's fiscal flexibility over the medium term."
The rating agency added that the overall debt of the Irish government will increase by 2012 to an enormous 113 percent of the gross domestic product of Ireland. They said that is over one-and-a-half times over the average for the other European Union countries.
It even surpasses Spain and Belgium by a significant amount, said S&P.
Depending on how the government of Ireland performs fiscally, the rating could be lowered again, especially if the time-frame is extended, of in the case of their deficit being reduced quicker, it could result in an upgrade.
More than likely we'll see things get worse for the Emerald Isle before they get better. That means there will probably be more downgrades in the future, and they won't be the only country experiencing that unwanted distinction.
Reasons given for the downgrade were the enormous costs associated with supporting the financial system of the country.
Irish bonds were slashed one level to "AA-" from "AA." A negative outlook was also assigned. The short-term rating was maintained at "A1+."
S&P said the increasing costs will "further weaken the government's fiscal flexibility over the medium term."
The rating agency added that the overall debt of the Irish government will increase by 2012 to an enormous 113 percent of the gross domestic product of Ireland. They said that is over one-and-a-half times over the average for the other European Union countries.
It even surpasses Spain and Belgium by a significant amount, said S&P.
Depending on how the government of Ireland performs fiscally, the rating could be lowered again, especially if the time-frame is extended, of in the case of their deficit being reduced quicker, it could result in an upgrade.
More than likely we'll see things get worse for the Emerald Isle before they get better. That means there will probably be more downgrades in the future, and they won't be the only country experiencing that unwanted distinction.
Thursday, July 22, 2010
Bernanke's Misguided Policies Drive Gold Prices Up
Anyone who thinks gold prices are going to plunge, better read up on Ben Bernanke and his philosophy for running the Federal Reserve, which is nothing more than printing as much money as needed to pretty much do absolutely nothing, as evidenced by the ongoing recession.
Gold prices are going to continue to go up based on nothing else but that, although there are other factors which will contribute to the price movements of gold.
It's an incredible joke to hear economic and business writers say that gold prices are going up because the Federal Reserve will act to "stimulate" the economy if needed.
As mentioned, printing and throwing money at the problem can't be equated with economic stimulation, as the last two years have shown. There has been no stimulation, just artificial props that crash once they're removed, like the tax credit for new home buyers.
For gold investors it's good news to be reminded of these foolish actions, as it guarantees gold prices will move up for some time to come, as there can be no doubt the economy will continue to sputter, and Bernanke will crank up the printing presses yet again.
It also guarantees a robust Tea Party movement, as these types of actions are what led to organic formation of the political powerhouse to begin with, as government spending continues to spiral out of control and bring the United States to the point of ruin.
This is why gold will continue to attract new investors, and why it'll hold its own against the majority of investments for some time to come.
Gold in the short term will probably continue to fluctuate, as mixed economic news continues to be the narrative, giving differing signals at the same time.
But as the market slowly realizes Europe is far from fixed, even though some are attempting to make it look like it's back to business as usual, we'll see gold get a huge push from the ongoing sovereign debt crisis as well.
The recent downgrade of Ireland's debt reminds us of the threat still inherent in the European Union, and which isn't close to being taken care of.
For gold, all of this is going to keep support under it, and once it takes off again, will probably move to record highs, as there will be very few places to put our money.
Gold prices finished up for the third day in a row, increasing to $1,195.60 an ounce on the Comex in New York.
Gold prices are going to continue to go up based on nothing else but that, although there are other factors which will contribute to the price movements of gold.
It's an incredible joke to hear economic and business writers say that gold prices are going up because the Federal Reserve will act to "stimulate" the economy if needed.
As mentioned, printing and throwing money at the problem can't be equated with economic stimulation, as the last two years have shown. There has been no stimulation, just artificial props that crash once they're removed, like the tax credit for new home buyers.
For gold investors it's good news to be reminded of these foolish actions, as it guarantees gold prices will move up for some time to come, as there can be no doubt the economy will continue to sputter, and Bernanke will crank up the printing presses yet again.
It also guarantees a robust Tea Party movement, as these types of actions are what led to organic formation of the political powerhouse to begin with, as government spending continues to spiral out of control and bring the United States to the point of ruin.
This is why gold will continue to attract new investors, and why it'll hold its own against the majority of investments for some time to come.
Gold in the short term will probably continue to fluctuate, as mixed economic news continues to be the narrative, giving differing signals at the same time.
But as the market slowly realizes Europe is far from fixed, even though some are attempting to make it look like it's back to business as usual, we'll see gold get a huge push from the ongoing sovereign debt crisis as well.
The recent downgrade of Ireland's debt reminds us of the threat still inherent in the European Union, and which isn't close to being taken care of.
For gold, all of this is going to keep support under it, and once it takes off again, will probably move to record highs, as there will be very few places to put our money.
Gold prices finished up for the third day in a row, increasing to $1,195.60 an ounce on the Comex in New York.
Monday, July 19, 2010
Moody's (NYSE:MCO) Downgrades Ireland Government Bonds
Government bond ratings from Ireland were downgraded by Moody's (NYSE:MC), a good reminder that the sovereign debt crisis in the European Union remains a key component of global economic health, and the patient remains in serious condition, possibly ready to move to critical.
The major reasons given be Moody's for the downgrade were these:
- The government's gradual but significant loss of financial strength, as reflected by the substantial increase in the debt-to-GDP ratio and weakening debt affordability.
- Ireland's weakened growth prospects as a result of the severe downturn in the financial services and real estate sectors and an ongoing contraction in private sector credit.
- The crystallization of contingent liabilities from the banking system, as represented by a series of recapitalization measures and the need to create the National Asset Management Agency (NAMA), a government-created special purpose vehicle that is acquiring impaired loans from banks.
It's good that Moody's did this, more, again, from the perspective that investors need to be reminded of the ongoing weakness of the European Union.
A number of media outlets, including financial ones, have been making it look like Europe was out of deep trouble and was doing well. That's far from the truth, and the sovereign debt crisis remains a major challenge for the global economy going forward, as the overall EU is the largest economy in the world.
As far as the actual downgrade of Irish government bonds, it was from Aa1 to Aa2.
The major reasons given be Moody's for the downgrade were these:
- The government's gradual but significant loss of financial strength, as reflected by the substantial increase in the debt-to-GDP ratio and weakening debt affordability.
- Ireland's weakened growth prospects as a result of the severe downturn in the financial services and real estate sectors and an ongoing contraction in private sector credit.
- The crystallization of contingent liabilities from the banking system, as represented by a series of recapitalization measures and the need to create the National Asset Management Agency (NAMA), a government-created special purpose vehicle that is acquiring impaired loans from banks.
It's good that Moody's did this, more, again, from the perspective that investors need to be reminded of the ongoing weakness of the European Union.
A number of media outlets, including financial ones, have been making it look like Europe was out of deep trouble and was doing well. That's far from the truth, and the sovereign debt crisis remains a major challenge for the global economy going forward, as the overall EU is the largest economy in the world.
As far as the actual downgrade of Irish government bonds, it was from Aa1 to Aa2.
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