16 July 2011

PIIGs Run to Gold and Silver as Euro Debt Crisis Deepens

Bullionsupermarket.com reports precious metal traffic from Portugal, Italy, Ireland and Greece spiking by as much as 130% as the European debt crisis threatens to run out of control during July. Spanish traffic, in contrast remains broadly flat.

The service only currently compares Gold and Silver prices in the US, UK, Canada and Australia. However, the increase in PIIG traffic looking to buy physical Gold and Silver, may indicate deteriorating confidence among small investors that policy makers will be able to resolve the european debt situation without serious drama.

This Friday saw 8 european Banks fail European Banking Authority stress tests, with a further 16 'almost failing' indicating the vulnerability of the European banking system to further shocks. Gold closed at $1592 per troy ounce.

The fact that the number of banks failing was less, and by less of a capital shortfall than expected, may fail to provide the reassurance to markets that European policymakers intend, as the last 'stress tests' in 2010 passed Irish banks just weeks before they had to be bailed out. Perhaps the most relevant factor to the markets currently, a possible Greek default was not taken into account by EBA stress tests.

With US debt ceiling raising yet to be approved by law makers, threatening a potential US default as early as August 2nd, which would cause major turmoil in markets, it is hard to imagine a more positive environment for Gold and Silver than right now.


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