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Gold & Crude Oil Both Gain on Mixed Feeling About EU & US

July 22, 2011 at 18:42 by Vladimir Vyun

The outcome of the European Union summit and disagreement among the US politicians about measures to reduce the national debt had mixing impact on markets. On one hand, some traders hope that the plan of the European leaders would contain spreading of the debt crisis, while the US lawmakers would reach accord. On the other hand, many market participants fear that the US government wouldn’t be able to raise the debt ceiling before the deadline on August 2 and the debt problems would spread among European nations. As a result, crude oil and gold rose in tandem, even though they usually move in opposing directions.

EU boosted its bailout fund and allowed to use for buying bonds of indebted nations. Fitch Ratings commented on the results of the EU summit:

The commitments agreed by euro area Heads of State represent an important and positive step towards securing financial stability in the euro zone. Fitch considers the nature of private sector involvement in a new financial programme of support for Greece to constitute a Restricted Default event. However, the reduction in interest rates and extension of maturities potentially offers Greece a window of opportunity to regain solvency, despite the formidable challenges that it faces.

New York Times claimed that US President and senators reached headway in securing agreement about steps to increase the federal debt limit, but the rumors were quickly denied by the US officials.

Futures for delivery of gold in August gained $17.20 (1.1 percent) to $1,604.20 as of 11:10 on COMEX. September futures for delivery of crude oil added $0.54 (0.5 percent) to $99.67 per barrel by 12:25 on NYMEX.

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