Gold and silver prices continue to consolidate, with dollar strength versus the euro capping gains in the metals. Gold continues to trade around yesterday’s front month settlement price of $1,544.40, while silver is currently trading just below yesterday’s settlement at $37.57 per troy ounce.
Despite confirmation that Jean-Claude Trichet and the European Central Bank will likely raise interest rates again in July, the euro lost ground against the dollar yesterday. News today that investors recently balked at buying one billion euros-worth of bonds from Banco Santander SA that were backed by local Spanish government debt again highlights the fragile nature of European debt markets.
Similar dynamics are still evident in American debt markets, which come the end of the Fed’s latest quantitative easing programme at the end of this month, could spur further losses in financial companies and the broader US stock market.
Of additional concern for monetary authorities is the fact that crude oil prices rose for a third consecutive day yesterday, following on from media reports of arguments between OPEC members at a cartel meeting in Vienna on Wednesday. Brent crude closed up $1.70 (1.4%) at $119.55 a barrel, while WTI crude moved up by $1.19 (1.2%) to settle at $101.93.
Although superficial analysis might lead people to think that the Saudis – who led a group OPEC countries who are in favour of increasing production quotas – are doing others a favour by taking this line, this analysis from Jim Sinclair’s Mineset suggests that all definitely does not meet the eye as far as this latest OPEC spat is concerned.
The Saudis are in fact looking to increase the price of crude oil that they sell. The stagflationary implications for western economies are obvious.
