European and Asian stocks have fallen in trading today following confirmation on Sunday that the Greek government will miss its deficit targets for this year. Greece had agreed to make austerity measures worth US$8.8 billion in 2011 and 2012. As The Wall Street Journal notes, the country’s deficit this year will be 8.5% of GDP – €18.69 billion ($25 billion) – well above a target of €17.1 billion. For 2012, Greece is aiming for a deficit of 6.8% of GDP, or about €14.65 billion. The Greek economy is expected to contract by 5.5% this year, deeper than the previous forecast of 3.9%.
Friday marked the close of an abysmal third-quarter for stocks, with America’s S&P 500 down 14% over the period. As EuroPacific Capital’s Peter Schiff discusses in a video on his website, the Russell 2000 Index – comprising a lot of smaller more speculative American venture companies – suffered even greater declines, and was down 22%. Unsurprisingly given the issues in Greece, there was even more metaphorical “blood on the streets” in Europe, with Germany’s DAX down by 25% over the quarter; overall, European markets suffered their worst quarter in nine years.
However, despite gold suffering its worst month in three years in September, overall for the quarter the gold price rose by 8%. Furthermore, as Dan Norcini shows at his blog, the monthly price-trend for gold remains defiantly bullish, despite the best efforts of short-sellers over the last month.
Though gold and silver prices remained largely flat last week, the latest silver Commitments of Traders report shows a significant drop in short positions in Comex silver futures on the part of those deemed “large commercial” entities – comprising producers, merchants and swap dealers. Not since November 2008 – after the huge panic sell-offs in equities and commodities prompted by the Lehman collapse in September of that year – has there been such a small commercial net-short position in silver futures.
As the GotGoldReport remarks: “The last time the combined commercial traders were this ‘small’ on the short side of silver futures, November 25, 2008, the price of silver then was $10.33 the (sic) ounce. Therefore, with silver at $31.88 on Tuesday, having tested as low as $26.04 in panic liquidation selling the day before, we can say that commercial traders had about as much confidence in the price of silver going lower as they did at $10.33 silver three years ago.” Thus, the future is looking good for silver prices.
Gold buyers will also be interested by the news that the Qatari sovereign wealth fund plans to spend $10 billion on stakes in gold producers. More funds are sure to follow in the Qataris' footsteps.