Commodity Blog

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Traders Need Precious Metals as Protection from European Crisis

October 6, 2011 at 18:20 by Vladimir Vyun

The concerns about the credit crisis in the European Union continue to haunt markets and that helps to support prices for precious metals. Great Britain also has its share of problems that spur investors to buy precious metals as a safe haven.

Both the Central European Bank and the Bank of England left their interest rates unchanged, but expanded their bond purchases programs. The same monetary policy decision had a vastly different effect on currencies of the nations, boosting the euro, but weakening Britain’s sterling. Yet the fact the policy makers of European Union and Britain embarked on quantitative easing undoubtedly means problems in both of these regions and that’s beneficial for safer assets, like gold and silver.

The BoE was rather dovish in its outlook:

The weaker outlook for, and the increased downside risks to, output growth mean that the margin of slack in the economy is likely to be greater and more persistent than previously expected.

The ECB wasn’t optimistic, either:

The underlying pace of monetary expansion continues to be moderate. Ongoing tensions in financial markets and unfavourable effects on financing conditions are likely to dampen the pace of economic growth in the euro area in the second half of this year. The economic outlook remains subject to particularly high uncertainty and intensified downside risks.

Gold advanced from $1614.0 to $1652.0 per ounce on COMEX today as of 18:13 GMT on COMEX, rising for the second day. Spot price for silver jumped from $30.46 to 32.11 per ounce. Platinum settlement climbed from $1478.0 to $1507.0 per ounce.

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