Gold prices exploded in Europe overnight, as the parent company of Portugal’s second-largest bank defaulted on a bond payment. The news pushed European stocks to a two-month low, and depressed the euro currency.
On top of fears of a “domino effect” among banks in distressed southern European nations, Israel announced that it is calling up 20,000 soldiers, for a probably invasion of the Gaza Strip to stop rocket attacks by the terrorist group Hamas.
The dollar and yen are both seeing safe haven demand, as Wall St. opened solidly lower in an atmosphere that one trader described as “sell first, ask questions later.” While some openly wonder if this is the start of the Big Correction expected in the stock market bubble, it’s really too soon to tell. The Nikkei in Tokyo saw a fourth straight day of losses.
Bloomberg reports that gold is up 12% so far this year, and that gold ETFs are at a two-month high. Platinum and palladium ETFs are at all-time records, as the reality of increased demand and greatly diminished supply sink in. Gold has blasted through resistance at $1,338, with the next target being $1,365. The intra-day high so far this morning has been $1,346, with recent selling barely able blunt the rise.
Silver is trading near $21.50, while platinum is back over $1,500. Palladium saw a moderate correction this morning, which may be speculators taking profits amid fears that a Euro meltdown may be starting. This would affect automobile demand in the EU, which would mean lower palladium demand.
In economic news, first-time jobless claims last week dropped by a surprising 11,000, with only 304,000 people being fired. Analysts had expected the rate to stay steady at 315,000. This wasn’t enough to stop the stampede out of stocks this morning, however.
The FOMC meeting minutes from June were released yesterday afternoon, which reinforced the message of QE ending in October, but benchmark interest rates staying low for the foreseeable future. More analysts see inflation pressures building, and bets are increasing that the Fed will be too slow to react by raising rates. If so, this means that real interest rates will continue to be negative, eliminating one of the opportunity costs of holding physical gold.