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Investors and Analysts Watch European Meetings

Release Date: 
Monday, December 5, 2011

Meetings among the leaders of Europe this week aimed at solving the region's debt crisis are being monitored closely by investors and the precious metals markets. "The gold market this week will be shaped by the many political meetings due to take place, which are likely to focus on the sovereign debt crisis," Commerzbank analysts wrote in a research note. "Friday's European Union summit is the most important meeting over the next few days, though we can expect a long wait before a permanent solution to the crisis is found."

The European Central Bank is expected to cut interest rates by 25 basis points. "This should lend support to the gold price since the opportunity costs of holding gold will remain low," Commerzbank said.

"Market hopes of progress on Europe should support gold prices for the next few days ahead of an expected ECB rate cut on Thursday," analysts at ANZ said in a note.

German and French leaders agreed on a plan that is likely to be a key part of the discussion at the euro zone meetings this week. French President Nicolas Sarkozy said, "We want to make sure that the imbalances which led to the situation in the euro zone today cannot happen again?"

German Chancellor Angela Merkel said in a statement: "This package shows that we are absolutely determined to keep the euro as a stable currency and as an important contributor to European stability."

(Sources: "Highlights: Sarkozy, Merkel outline euro zone master plan," Reuters, December 5, 2011, 2011; "PRECIOUS-Gold dips, investors cautious before euro zone summit," Reuters, December 5, 2011; "Gold drops as investors eye Europe events," MarketWatch, December 5, 2011; )

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†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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