Greek 10-Year Yield Surges Over 13.2% - Euro Falls against Gold and Particularly Silver

By @ibtimes on

Gold is tentatively higher against the euro but mixed against other currencies, while silver is higher again in most currencies. Both probed upward this morning and are exhibiting signs that they may push higher prior to a much anticipated correction. 

The Greek 10-year yield has just surged over 13.2% and this is leading to falls in the euro and risk aversion with equities, commodities and oil falling.

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Both gold and silver are less than 2% from their record nominal highs seen Monday (gold all time and silver 31-year) and are remaining firm due to concerns about the US dollar, the euro and sovereign debt issues in Europe.

While markets are not focusing on geopolitical risk in Africa and the Middle East and the Japanese natural and nuclear disasters, these problems remain and will lead to continuing safe haven demand.

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Resistance in gold is at Monday's record nominal high at $1,478.20/oz and the psychological level of $1,500/oz.

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Silver's resistance is at Monday's multiyear nominal high at $41.95/oz. In normal circumstances profit taking would be expected near $42/oz but this is anything but a normal market due to the existence of massive concentrated short positions being investigated by the CFTC.

A short squeeze may be underway with longs buying all dips in order to punish the shorts and force them to buy back their short positions thereby propelling the price much higher.

The dollar's fall suggests that markets are skeptical of Obama's latest budget proposal to cut $4 trillion off the massive US budget deficit. The US fiscal situation continues to deteriorate week on week and month on month which could potentially lead to sharp falls in the dollar in the coming weeks.

Eurozone debt markets are under pressure again this morning with Greek 10-year bonds surging to a lifetime record high of 13.2%. Greece appears to be heading towards sovereign default despite the usual denials. Greece's debt has become unsustainable, only a year after it was granted the biggest bailout in history. Debt levels in Ireland, Portugal and Spain also look increasingly unsustainable.

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GFMS' prediction of gold rising to $1,600/oz and an average price of $1,455/oz in 2011 (today's current price) was reported in much of the financial press but as usual ignored by most of the non-specialist financial media.

GFMS are bullish on gold in 2011 and into 2012 particularly due to investment and monetary demand. This demand looks set to continue and they identify rising inflation and US sovereign debt risk as a threat with America's AAA status more likely than not to be questioned in H2 2011.

GFMS say that global mining supply has increased primarily due to another significant jump in Chinese gold production - up 8% to 350.9 tonnes from 324 tonnes.

The increase in Chinese gold production in recent years has been very large, to the degree, that some analysts have questioned their production figures. Mine supply from other major producers continues to be flat or fall as seen in South Africa and Russia production figures.

Gold

Gold is trading at $1,455.40/oz, €1,011.40/oz and £891.68/oz.

Silver

Silver is trading at $40.61/oz, €27.87/oz and £24.89/oz.

Platinum Group Metals

Platinum is trading at $1,766.50/oz, palladium at $757/oz and rhodium at $2,350/oz.

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