Gold Prices Fall Even as Italy Pays Bond Investors More Than Greece, Brexit ‘No Deal’ Now Evens
Gold Prices Fall Even as Italy Pays Bond Investors More Than Greece, Brexit ‘No Deal’ Now Evens by Adrian Ash – Bullion Vault
GOLD PRICES failed to hold a rally above $1190 per ounce for the second day running in London trade Wednesday, dropping back as the US Dollar rose and world stock markets fell again amid fresh worries over Italy’s government deficit and the UK’s impending Brexit from the European Union.
The Chinese Yuan held its lowest value against the Dollar in 17 months despite a senior Beijing official expressing “optimism” about resolving the tit-for-tat trade war tariffs with Washington.
Gold also fell against a weakening Euro, erasing most of last week’s 1.7% gain to trade back down at €1032 per ounce.
Milan’s FTSE MIB stock index meantime fell for the 8th session in two weeks, helping pull the EuroStoxx 600 3.2% below last Wednesday’s close, as Italy’s government paid the highest borrowing cost in half-a-decade to raise a 1-year loan from the bond market.
Investors locked in a yield of 0.94% on €6 billion of new Italian debt.
Greece meantime paid an annualized 0.65% on €625m of 13-week Treasury bills today.
Yields on 1-year bonds from all other Eurozone states – including Spain and Portugal – held well below zero, with investors willing to lose 0.59% of their money to hold Germany’s short-term government debt.
“Should I change my policies – my agreement with Italians – on the basis of what some speculators decide in the morning? No,” said Italy’s deputy prime minister Matteo Salvini of the right-wing Lega Party today, defending his coalition government’s plan for a 2.4% budget deficit in 2019.
Vowing that Italy’s 10-year spread over German Bund yields won’t reach 4 percentage points – a level last seen in the crisis of 2012 – Salvini also said he wants Italian residents to get a tax break on investing in Rome’s debt.
The BTP-Bund yield spread today eased back from Tuesday’s peak, but held near a 5-year record above 3 percentage points.
Italy checking all the boxes in terms of how not to react to a building market crisis; demonise “speculators”; draw tempting lines in the sand; impugn those able to provide a backstop; forlorn pleas for locals to buy debt.
— econhedge (@econhedge) October 10, 2018