by
GoldCore
Today’s AM fix was USD 1,289.00, EUR 933.25
and GBP 762.54 per ounce.
Yesterday’s AM fix was USD 1,291.25, EUR 926.03 and GBP 761.13 per ounce.
Yesterday’s AM fix was USD 1,291.25, EUR 926.03 and GBP 761.13 per ounce.
Gold fell $0.20 or 0.016% yesterday to
$1,289.20/oz. Silver slipped $0.14 or 0.73% to $19.17/oz.
Gold held steady around $1,290/oz today,
underpinned by strong chart support. Unless, it rises by some 1%
today, it is set to fall marginally for a second week. Traders are
likely to be nervous about being short gold due to the “event risk”
given the significant continuing geopolitical tension due to the
crisis in Ukraine.
Despite the losses this week, the fundamentals
remain sound. One of these key fundamentals are still ultra loose
monetary policies. This week heard confirmation that the monetary
policies of the Federal Reserve, ECB and Bank of England are set to
remain ultra loose and in the ECB’s case may become even looser.
ECB president Mario Draghi said yesterday that
the bank was ready to take action next month to boost the euro zone
economy if updated inflation forecasts merited such a move.
The dollar extended gains against the euro
today after posting its biggest one-day drop in nearly two months
yesterday, as investors positioned for more dovish monetary policies
from the European Central Bank and the increasing possibility of ECB
currency printing and debt monetisation.
Gold appears to be consolidating and has found
solid support at its 100 day moving average at $1,287/oz – see
chart below.
Gold rallied to three-week highs on Monday at
$1,315/oz on the back of elevated tensions in Ukraine, but it failed
to maintain those gains after Russian President Vladimir Putin said
he was willing to negotiate with European officials over the crisis.
Pro-Moscow separatists in eastern Ukraine
ignored a public call by Putin to postpone a referendum on self-rule,
however, declaring they would go ahead on Sunday with a vote that
could lead to war.
While tensions with Russia have abated, it
appears to be the case of the calm before a possible
geopolitical storm.
Gold premiums in India, the world’s second
biggest bullion consumer, slipped marginally this week.
Premiums remain elevated at nearly $100 per ounce, showing that
demand remains robust despite expectations of a relaxation in
import curbs. The relaxation in import taxes is expected to lead a
significant increase in official Indian demand again.
Among other precious metals, silver was up 0.1
percent at $19.15 an ounce, while spot platinum was down 0.6 percent
at $1,424.40 an ounce and spot palladium was down 0.2 percent at
$799.22 an ounce.
Platinum group metals prices have been
supported by the geopolitical tension with Russia and the long
running miners’ strike in major producer South Africa, currently in
its sixteenth week.
Prudent buyers will continue to dollar cost
average into precious metal allocations on weakness.
EU
Sees Political Deal on ESM And Bail-Ins by June
EU finance ministers are nearing political agreement on how the EU’s firewall fund could provide direct aid to banks after bail-ins, Dutch Finance Minister and chairman of eurozone finance ministers, Jeroen Dijsselbloem has said.
EU finance ministers are nearing political agreement on how the EU’s firewall fund could provide direct aid to banks after bail-ins, Dutch Finance Minister and chairman of eurozone finance ministers, Jeroen Dijsselbloem has said.
The
European Stability Mechanism’s (ESM) direct bank recapitalization
tool and
bail-ins have been developing for nearly two years. Dijsselbloem said there was broad support for his latest proposal, which sets conditions for when and how bail-ins and the bank-aid tool will be usable in 2015.
bail-ins have been developing for nearly two years. Dijsselbloem said there was broad support for his latest proposal, which sets conditions for when and how bail-ins and the bank-aid tool will be usable in 2015.
“We made very good progress” Dijsselbloem
told reporters in Brussels after he led a meeting of his euro-area
counterparts. The plan “will allow ministers to seek, where
necessary, a parliamentary mandate in view of a political decision
which we can then take before our next regular meeting of June 19,”
he is quoted as saying by Bloomberg.
A long-running debate over backstops has direct
implications for the success of the European Central Bank’s stress
tests of 128 banks – many of which are still vulnerable.
Dijsselbloem said the planned guidelines will
be most important during the year before the start of new EU rules in
2016 on how to assign losses to creditors at failing banks.
The EU’s bailout fund, the European Stability
Mechanism (ESM) , could directly invest in a troubled bank next year,
after 8% of the bank’s total liabilities are written off,
Dijsselbloem said.
The bloc’s leaders agreed in 2012 that the
ESM must have the option of directly buying a stake in a troubled
bank to break the “doom loop” that binds indebted governments to
the unstable banks they are trying to prop up.
Jeroen Dijsselbloem, who chairs meetings of
eurozone finance ministers, said ministers agreed the ESM should be
able to bail out banks next year after the option of raising money
from “private investors” or the government failed.
He again failed to mention that money would
also be “raised” from savers and depositors.
This means the direct investment of the euro
zone bailout fund in a troubled euro zone bank would be a last-resort
measure after all other options, including depositor bail-in, were
exhausted.
Once the Bank Resolution and Recovery Directive
is fully in force from the start of 2016, not only a bank’s
shareholders but also bondholders and even large depositors will lose
money before government or euro zone money could be used to save a
bank from collapse.
It seems likely that in the event of another
Northern Rock, Bear Stearns or worse Lehman Brothers like systemic
crisis that the EU would expedite the ESM and bail-in legislation.
ConclusionEU
politicians and bureaucrats say that this is part of the effort to
prevent another debt crisis flare-up.
Critics fear that bail-ins are another way of
protecting indebted large banks at the expense of already hard
pressed savers and depositors including small and medium size
businesses – the backbone of most economies.
EU policy-makers call this a bail-in,
contrasting it with using taxpayers’ money to bail out failing
banks.
There appears to be a complete failure to
consider and understand that there is a risk of creating a new “doom
loop” between indebted governments, creditors who are wiped out and
some who are turned into debtors and unstable banks. There is also a
failure to realise that bail-ins will likely result in capital
controls and all the attendant negative consequences that they have
on an economy.
Not to mention, the dreadful effect bail-ins
would have on already fragile consumer and business sentiment is
struggling Eurozone economies.
As our extensive research points out, bail-ins
create a risk of runs on banks – thereby making indebted banks even
more insolvent and entrenching the “doom loop” that policy makers
are attempting to prevent.
The coming bail-in regimes will pose real
challenges and risks to investors and of course depositors – both
household and business.
Return of capital, rather than return on
capital will assume far greater importance.
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