Gold Edges Higher, Greece Remains in Focus

Posted on: February 15, 2012

Gold prices are trading higher Wednesday, rising in tandem with a stronger euro after China pledged to continue investing in Eurozone debt, and economic data showed France’s economy bounced back slightly in the fourth quarter. Silver prices are also modestly higher, trading at $33.59 as of 7:20 a.m. PT.

Early Wednesday, China announced it would continue to buy euro-backed assets like bonds from the European Financial Stability Fund, temporary bailout fund, or European Stability Mechanism, permanent bailout fund. In addition, data released earlier today showed France’s economy grew 0.2% in the first quarter and 1.4% versus last year.

While growth was only slightly better-than-expected, the positive data in conjunction with China’s announcement helped the euro gain traction against the dollar, pushing gold prices decisively higher. “It looks to me like gold is just trying to form a real strong base to move higher,” said Chuck Butler, president of EverBank World Markets to Reuters. “I still think that gold is going to come back to at least its previous highs of last year… I really do think that gold is the anti-dollar if you will.” Butler also argued that gold will continue to be the safe haven currency of choice as long as the U.S. doesn’t have a balanced budget or rising interest rates. Echoing Butler’s bullish sentiment, AngloGold Ashanti chief executive Mark Cutifani told reporters in a conference call Wednesday that gold prices could “easily poke through $2,000″ an ounce this year.

Greek bailout talks have entered a new phase of uncertainty after Eurozone finance ministers called off a meeting to approve a new bailout and debt-restructuring plan for Athens. The announcement that the planned gathering in Brussels had been canceled came as officials said Greece had failed to finalize details of an austerity program that’s a prerequisite for receiving a second bailout. A conference call with Eurozone finance ministers is set for later today.

Adding to uncertainty over Greece, some Eurozone countries have expressed strong doubts over whether a second massive bailout can actually save the country, officials said Wednesday. The Associated Press is reporting that politicians in several euro countries have grown increasingly impatient with Greece repeatedly missing budget targets and failing to implement spending cuts and reforms. Further, some policymakers are optimistic that the Eurozone is now strong enough to handle a default by Greece; however, others are concerned that the shockwaves of a disorderly Greek default would be felt across the rest of Europe and potentially the U.S.

Henry Paulson, former Treasury Secretary and founder of the Paulson Institute told CNBC on Wednesday that the problems of not just Greece, but all of Europe are incredibly complex and will take several years to resolve. “There is similarity (with the 2008 financial crisis in the U.S.) in certain regards. This has been going on for a long time and I think it will take years to play out,” Paulson said.