2011-07-23

Gold price bounced back above $1,600 on Friday

The gold price bounced back above $1,600 on Friday, rallying $11.17 to$1,602.13 alongside the price of silver. While the price of gold advanced, gold’s sister precious metal climbed $0.52 to $39.85 per ounce, despite modest strength in the U.S. dollar. The euro currency fell 0.4% to 1.4371 this morning, following yesterday’s surge from 1.41 to 1.44 on the heels of the European summit on Greece.

At the summit, policymakers also agreed to a new round of bailouts for Greece, totaling €109 billion. France’s Nicolas Sarkozy, Germany’s Angela Merkel, and other top officials also agreed to extend the maturity of future loans for Greece to a maximum of 30 years (from the current 7.5 years). In an official statement, the euro zone pledged that member nations would work closely to develop concrete proposals by October “to improve working methods and enhance crisis management in the euro area.”

While markets cheered the European news on Thursday, there are many details that still need to be worked out. Furthermore, given the various circumstances facing each member of the PIIGS and the fact that many of these measures have not previously been implemented, significant uncertainty remains.

Furthermore, as Reuters noted in a report yesterday, the European summit “is very unlikely to mark a complete resolution of the crisis, as Merkel herself acknowledged earlier this week…A second bailout may simply keep Greece afloat for a number of months before a tougher decision has to be made on writing off more of its debt.”

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