Receding Italian Debt Fears Buoy Gold Spread Betting Market
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 14 November 2011
Who’d have thought that an ex-banker would have been asked to run the third most heavily indebted country in the world after years of animosity towards them?
Populist thinking fails to appreciate that it’s the politicians who are ultimately to blame for this bout of turmoil in the financial spread betting markets and it is only them who can possibly turn things around.
At least this time there’s a degree of hope that a banker turned politician will be able to implement the sort changes required to pull Italy back from the brink.
For now the markets seem to be calm but the job that lies ahead for Mario Monti is no minor one. The sort of reforms that are needed will come up against substantial opposition and for many the fact that he’s an ex-banker will probably rub the wrong way.
At least he has some things on his side that should assist him with the job. Despite its vast debt piles, Italy has a huge portfolio of reserves and assets, one of which is among the largest hoards of gold in the world.
This morning the FTSE is tentatively higher by some 20 points to 5570. Last week ended up being a relatively bullish one for the index after Friday’s rally and on the hourly chart a double bottom has formed around the 5350 area.
Over the short term this 5400 to 5350 area has become rather a crucial support area meanwhile to the upside 5620/40 are seen as resistance.
Over the longer term, the index rejected the 200 day moving average at the end of October however it has slowly but surely been trying to get back up there. It will be interesting to see whether the momentum and appetite from the bulls is there to carry us higher.
The Dow Jones on the other hand has not even rejected its 200 day moving average and, whilst it has suffered from a bit of choppiness around this 12000 area, it’s still above that level.
Economic data is thin on the ground today but the week starts to get more interesting on this front tomorrow with GDP numbers from German, France and the EU.
Never before have so many people in the UK be this interested in GDP data from the continent as it could so worryingly have a knock on effect for us.
Things appear to be looking up for the euro, well at least short term anyway. Traders of the euro were encouraged by the instalment of a new Italian PM, which helped the single currency pretty much reinstate all the losses it made against the dollar last week.
There was also a bit of a boost from the Greeks, as their new Prime Minster took up his new role. In addition, the Greek finance minister stated that his priority was to get the next EU-led loan tranche in place.
EUR/USD is trading at $1.3716 currently, with support at $1.3675 and resistance at $1.3815.
The gold spread betting market was in favour on Friday as the fear of Italy joining Greece in the cess pit receded and investors returned to the yellow metal, helping push the price higher.
Investors watching gold’s price of late may view it as being caught between two factors.
On the one hand, there would be the bearishness of a sovereign default, which could trigger a liquidation run from holders needing to cover margin calls elsewhere.
In contrast, there would also be support provided by the uncertainty over potential economic bankruptcies.
The weakening US dollar helped keep the precious metal higher on Friday and all in all gold added $32.5 to its price, finishing at $1790.7.
With the weakening US dollar and strengthening stock market indices, the appetites of energy investors were wetted on Friday and hence the price was pushed to new recent highs.
Traders will still have lingering concerns over faltering Europe though and, with signs of a slowdown in China, the world’s second highest oil consumer, the road ahead may not be smooth for black gold’s price. This morning Brent is at $113.15.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'Receding Italian Debt Fears Buoy Gold Spread Betting Market' edited by SD, updated 14-Nov-11
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