NEW YORK (Commodity Online): Investor pessimism on the Euro debt crisis continue to strengthen as the German bunds continued their fall for a second day. COMEX Gold December contract is trading at $1695, up $3 on Thursday and there remains a strong possibility of further upside potential with weak data from China and Japan. Strong technical support is seen at $1680 and $1625 while upside moves may find resistance at $1725 and $1775.

-Speculation is rife that the Eurozone may be moving towards a common debt sales, a claim which German Chancellor Angela Merkel rubbished off. Spanish and Italian yields are still high. Portugal's credit rating was downgraded to junk by Dagong, the Chinese rating agency. And Fitch rating agency. Bloomberg reported that the Japanese have been selling German bunds and instead buying UK bonds.

The main fear however is the speculation of a unified Euro bond. In such a situation, Germany will have to pay a higher rate of interest for its bonds and this will hamper growth in the largest European economy.

On Wednesday, Germany had failed to completely auction off its bonds, an indication that investors were losing confidence in the torch-bearer of Europe. Out of about 6 billion Euros of bond auction, Germany was only successful in selling less than 4 billion.

-S&P raised concerns about the Japanese government's inability to reduce the massive debt burden, indicating that the rating agency may be readying itself for downgrading Japan.

-Chinese economic indications have been disappointing. After November PMI fell by the largest decline in almost 32 months, a credit squeeze in certain regions are raising concerns if China too will slow down considerably. The People's Bank of China cut their reserve ratio for more than 20 credit institutions by half a percentage point after a number of companies are suffering a credit squeeze. With home sales declining more around 25% in October and manufacturing activity showing a decline, further evidence of Chinese slowdown will inevitably be bullish for gold.

 

 

 

Post your comment  (0)

Connect:

Post to Twitter

Post to Facebook