GOLD PRICES UNDER PRESSURE FROM STRONGER DOLLAR

by Goldline.com | November 16, 2011

Gold prices are lower today as investors rushed to the U.S. dollar after borrowing costs soared across the Eurozone. 10-year yield spreads between Germany and other Eurozone nations are hitting 52-week highs. Italian bond yields rose back above 7%, a level seen as unsustainable, and Spanish bond yields hit a 14-year high. "That tells you that things are not OK," said Dominic Schnider, head of commodity research at UBS Wealth Management in Singapore to Reuters. "It will give gold some support, although the dollar is putting some pressure." (Reuters, 11/16/11)

U.S. stocks are also down Wednesday as fears over contagion in the European bond market made investors more cautious. Uncertainty over whether the leadership changes in Greece and Italy will lead to a successful plan to resolve the European debt crisis has dampened investor sentiment this week. “Markets remain very skeptical that Greece and Italy aren't going to be able to institute the reforms necessary to right their fiscal ship,” said Mark Luschini, chief investment strategist at Janney Capital Markets to CNN Money.(CNN Money, 11/16/11)

Republicans and Democrats remain far apart on a deal to reduce the country’s deficit, according to the latest report from CNBC. The deficit for the just-completed budget year was $1.3 trillion, requiring the government to borrow 36 cents for every dollar it spends. The U.S. super committee has approximately a week to find $1.2 in cuts; however, CNBC reports, “several officials said that in reality, perhaps as little as 48 or 72 hours are available to the six Republicans and six Democrats.” (CNBC, 11/16/11)

†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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