EU TALKS: LEADERS BALANCE RESCUE AND REFORM

by Goldline.com | December 09, 2011

Gold traded higher on Friday as the euro rose and the dollar fell. Currencies reacted to the news that a new Chinese investment vehicle could provide additional funding to troubled euro zone economies and help ease the region's debt crisis. The ensuing weakness in the dollar supported the gold price which rose to $1715.30 per ounce on the New York Spot Market by 10:30 AM Pacific Time. Silver was also higher at $32.31 per ounce.

The European Union (EU) failed to secure the agreement among its 27 members for a new pact requiring stricter financial coordination between countries, a step that would require changes to EU treaties. Instead, at least 23 of members, including all euro-zone nations, agreed to tighten fiscal rules. "We’re doing everything we can to save the euro," French President Nicolas Sarkozy said on Friday.

VTB Capital analyst Andrey Kryuchenkov said the EU leaders "need to convince the market that the crisis can be contained. Gold is trading completely against the dollar, moving in the opposite direction," he said, noting that physical investors seem to be waiting on the sidelines. Commerzbank analysts wrote in a note, "...we do not believe gold's long-term upwards trend to be under threat."

(Sources: "Tensions Rise at EU Summit," Wall Street Journal, December 9, 2011; "Gold edges lower in choppy Asian session," MarketWatch, December 9, 2011; "PRECIOUS-Gold rises as euro recovers, cautious over EU," Reuters, December 9, 2011)

†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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