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European Powers Expected to Increase Rescue Fund

Release Date: 
Wednesday, October 19, 2011

France and Germany are expected to support an expansion of the $607 billion European Financial Stability Facility (ESFS) ahead of the October 23 summit on Greek aid.  According to The Guardian, the nations will back the fund with $2.76 trillion.

German Chancellor Angela Merkel said yesterday the European Union summit will mark an important step, though not the final one, in solving the region’s debt crisis.

Moody’s Investors Service cut Spain’s credit rating yesterday for the third time in 13 months. Spain has the highest unemployment rate in the European Union and faces mounting debt issues.

Commerzbank analysts commented on gold, noting there "would certainly be grounds for a rise in price; it is becoming increasingly clear that a fast and comprehensive solution to the euro zone debt crisis will not be found at the EU summit this weekend."

"The fundamentals that support gold’s status as a safe haven have not changed," Julian Jessop, chief global economist at Capital Economics Ltd., wrote in a report. "Gold’s value does not depend on the creditworthiness of any government or financial institution. We continue to expect the price of gold to top $2,000 as sovereign-debt worries continue to build."

(Sources: "Spot Gold Inches Down as EU Worries Weigh," Wall Street Journal, October 19, 2011; "Gold Drops for a Third Day as Report on European Rescue Fund Curbs Demand," Bloomberg October 19, 2011; "Investors retreat from gold, opt for equities," Reuters, October 19, 2011)

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