G8 Nations Hanging Together

Gold had another decent day on Friday, rallying up from support at $1,550 to just shy of $1,575. Silver, platinum and palladium also rallied, somewhat surprisingly given that commodities and shares struggled (the Dow falling 0.6%) while US 10-year note fell by 4 basis points to 1.74% following news that the Spanish government’s rescue of the troubled bank Bankia will cost $24 billion – more than double previous cost estimates.

Spain’s sovereign borrowing costs have continued to rise in trading this morning, though the Greek situation has improved with polls showing that pro-bailout parties are now ahead. After elections earlier this month failed to deliver a new government, Greece will hold another election in June 17. As things stand, the pro-bailout parties command enough of the vote to form a new coalition government.

An all-too-often neglected aspect of the eurozone debt crisis is the political views and imperatives of non-European countries: chief among them, America. JSMineSet carries an interesting piece from Harry Schultz, discussing the recent G8 summit at Camp David:

 ...The bottom line is that if Greece leaves the Euro, the contagion will spread overnight to Spain, Portugal, Ireland, and, perhaps, even Italy. So, the IMF, the Obama Administration and the ECB are all on board to further delay the reality of the financial and banking crisis through hyperinflationary measures. The idea is that the situation will take many months to fully play out, and Obama and his re-election team hope that the system will hold together past the November elections.

New US GDP data and nonfarm payrolls data will be released on Thursday and Friday, which will be this week’s big numbers as far as the gold market’s concerned. Worse than expected data will boost gold and silver as speculation about more QE from the Fed grows, while better-than-expected reports will do the opposite.