The economic uncertainty in Europe pushed gold prices up over $1339 last, but the dire state of the Eurozone does not appear to be troubling traders in the Far East as they profited from sales and dragged the yellow metal down to $1320 before 11am GMT.
Precious metals recorded gains for six straight weeks last week after news broke out that Espirito Santo International were found to be in debt to the tune of $1.1bn. Although a private holding, Espirito Santo is a vehicle of Portugal’s central bank although claim they have no connection with the debt or the accounting “irregularities” that were exposed.
The news rattled the European market and investors turned to gold to hedge against other assets. Espirito Santo International is one of the largest institutions in Europe and is owned by the powerful, Espirito Santo family whose empire can be traced back to 1869.
One of the company’s board members is Ricardo Salgado, chief executive officer of Banco Espirito Santo who is also chairman of Espirito Santo Financial Group. Salgado has since lost his position with the bank. But the entire scandal has raised fresh fears over the economic uncertainty of the Eurozone’s debt crisis.
Civil unrest and Federal Reserve
The continuing saga in Ukraine is also steering investors towards gold. The Ukrainian President has vowed to dispel pro-Russian rebels from the strongholds in Donestk and Luhansk causing a mass exodus.
Over the weekend, Russia accused Ukraine of cross-border bombings which killed a Russian civilian. The Ukrainian government has denied the action, but did admit they attacked a convoy a 100 military vehicles carrying “mercenaries” near the Russian border. Russia officials are now threatening to invade east Ukraine with pinpoint airstrikes.
Gold prices also have been spurred by the US Federal Reserve’s decision to stave off raising interest rates until the economic recovery is stable. A rise in interest rates will bring gold prices down as they do not yield anything and cost money to hold in high-security vaults.
As a result of numerous influences, gold prices are up eight per cent on June and look set to continue their rise in July. With the conflict in the Middle East also causing concerns for the US, it is likely that Wall Street will react to the Asian market by investing in gold and raising the prices again.
The ebb and flow of gold prices has been the same pattern for the last three weeks so if you are interested in investing in gold in the European market – a safe bet right now – buy during early trading whilst the prices are low.
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