The European debt crisis returns to support precious metals again

The yellow metal advanced today after opening the session, where the European debt crisis returned to affect markets negatively and raise pessimism in light of the fragile confidence in the market, where investors are speculating again that Greece could disorderly default, especially after euro-area finance ministers failed to quell jitters and fears and disappointed investors, where they reached no agreement regarding the next tranche for Greece in addition to the second bailout package, which led investors to hold more gold as safe haven in order to protect their wealth especially after the losses seen across the board.

Gold surged after the opening of $1658.52 per ounce, to record a high of $1678.45 and a low of $1656.35, and is currently trading around $1667.55 an ounce, yet the metal could fluctuate heavily during the day and this week due to the awaited heavy fundamentals from central banks and lawmakers.

The European debt crisis has affected gold for long period of time, where the metal was able to set new all-time record on fears that Greece could default, which also could affect the euro zone as a whole especially as the contagion spread into Italy and Spain despite the several attempts to prevent the crisis from expanding within the zone, because it could affect the euro system and the common currency.

Europe remains the main focus in the market, as we can see renewed fears with the start of this week, especially after Greece announced that the government will miss budget targets this year and next year also due to the economic slowdown. Greece expects to reduce deficit by 8.5% of the total GDP this year, compared with international lenders target of 7.6%, while in 2012 the deficit will be 6.8% less, compared with international lenders' target of 6.5%, which renewed fears that Greece could default in case international lenders wasn't satisfied, where the Greek government could run out of funds unless lenders provided the next tranche of 2010's bailout package.

Today, European finance chiefs will gather again in Luxembourg to continue the discussion regarding the risk associated with a Greek default along with enhancing the expanded powers of the European Financial Stability Facility and finally the widening scope of the crisis.

Moreover, euro-area finance ministers agreed to provide collateral for loans to Greece, as the Finnish government said on Tuesday, awaiting more news from the European ministers to ease the jitters and control the volatility seen in the market.

Silver also gained today after opening the session at $30.37 per ounce, to record the highest at $31.30 and the lowest at $30.32. The metal trades now around $30.70 per ounce. We note that silver could be very volatile today, due to the mixed sentiment and the mixed dollar, which could incline and force both of silver and gold to trade lower repeating the scenario seen in the past week.