Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.2% on the belief that the eurozone will take more accommodative measures to stimulate growth. Group of Seven finance ministers held an emergency conference today, hosted by the U.S. Treasury, to discuss the financial crisis and its implications for the global economy. Increasingly, traders expect the U.S. and eurozone to coordinate policies to contain deteriorating conditions in Europe. After last Friday's dismal payrolls report, expectations of QE3 from the Fed have been building. Gold's gains were contained by a stronger dollar and a slight up-tick in the ISM sevices-sector index. Silver rallied by 1.4% while platinum and palladium added 0.9% and 1%, respectively.

At the close: August gold gained $3 to $1,616.90; July silver jumped 40 cents to $28.41; July platinum picked up $13.20 to $1,440.50; and September palladium rose $5.90 to $619.80 an ounce.

The main worry in the eurozone is how to the recapitalize Spanish banks. Spain claims to need some 40 billion euros, including 19 billion for the recently-nationalized Bankia, in order to compensate for bad property loans. It also says the credit markets are closing their doors, rendering it all but impossible to keep its banks solvent. Egan-Jones recently downgraded Spain�s credit rating to BB- from B, and Moody's downgraded 16 Spanish banks, driving the cost of insuring Spanish debt to an all-time high. Germany has rejected the pooling of eurozone debt because it doesn�t want financial responsibility for its indigent neighbors. The premium required for investors to take Spanish 10-year debt over safe-haven German bunds rose to a record high near 5.5% on worries Spain will ultimately need a Greek-style bailout, and debt-holders will be forced to take write-downs.

Whether the solution will be coordinated easing or some other procedure remains to be seen. Some economists expect a massive dollar swap, like the Fed and ECB undertook last fall, in which dollars are lent out in exchange for other currencies to provide additional liquidity to eurozone banks. This kind of interbank lending would help to prevent systemic risk from spilling over into equity markets from damaged banking systems. But it would be more defensive than stimulating to slowing world economies.