Gold prices rose by 3 percent on Friday, following a deal to help Europe’s struggling banks and help cut borrowing costs during a European Union summit, the commodity’s biggest one day jump since January 6th.
Reuters reports that Euro zone leaders have taken emergency action in order to bring down spiraling borrowing costs in Italy and Spain, working to create a single body that will supervise euro zone banks. The step, set to be completed by the end of the year, is the first step toward a European banking union.
Fox Business reports that Simon Weeks, head of precious metals at the Bank of Nova Scotia, stated:
“The news has been positive for the euro and positive for confidence in general, which means that equities and commodities, including gold for the time being, have all received a shot in the arm.”
Bloomberg Business Week notes that Carlos Perez-Santalla, a broker at PVM Futures Inc., based in Hoboken, New Jersey, stated:
“Gold has benefited from Europe’s decision as the EU plan is a step forward, and people expect the flow of funds to get less complicated.”
The news of the emergency action helped European shares jump by 1.9 percent in the euro versus the dollar, and oil prices saw a $4-a-barrel gain. According to Fox Business, not all of the news was met with joy. Marex Spectron stated in a note that:
“I’m afraid… this news.. is no more than a sticking plaster on an amputation, and as such while the markets will for the moment react favourably, in the long run we still have a long way to go.”
Do you think that the European Union’s decision will help gold prices in the long run, or is it simply a short-term solution?