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UAE April inflation at nine-month high 16:24
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Morning Snapshot

by Peter A. Grant

May 16, AM
(from USAGOLD.com) --

The range low in gold at 1522.40 successfully contained the downside in overseas trading as ongoing concerns about Greece and the eurozone as a whole persist, contributing to risk aversion. The euro has tested below 1.2700 for the first time since January, keeping the dollar underpinned. US stocks rebounded on some encouraging data, providing gold with a little nudge higher.

New Greek elections have been scheduled for June 16 after it was acknowledged yesterday that efforts to form a coalition government have failed. A senior Greek judge will head a caretaker-government in the interim. The market is likely to remain on edge ahead of the new election, amid expectations that the anti-austerity Syriza party is going to garner even greater support the next time around.

In the meantime, there may be a good old-fashion bank run brewing in Greece, with more than €1 bln withdrawn already this week. At this rate, Greek banks will have to be recapitalized at some point and there are already rumblings of an LTRO3.

However, as BoE governor Mervyn King adroitly pointed out, what Greece and the broader periphery faces is not a liquidity crisis at all, but rather a solvency crisis. Certainly, spooling up the printing presses could provide Greek banks with the liquidity they need to cover withdrawals, but that does nothing to resolve the core fiscal issues that led to the crisis in the first place. If you fail to address solvency in a meaningful way, you may as well prepare to print to infinity and beyond.

• US industrial production +1.1% in Apr, well above market expectations of +0.5%, vs negative revised -0.6% in Mar; cap use rises to 79.2%.
• US housing starts +2.6% to 717k in Apr, above expectations of 679k, vs upward revised 699k in Mar.
• Canada manufacturing shipments +1.9% in Mar, well above market expectations of +0.2%, vs -0.3% in Feb.
• UK ILO unemployment rate 8.2% in Mar, vs 8.3% in Feb.
• Eurozone CPI +0.5% m/m in Apr, in-line with expectations, vs 1.3% m/m in Mar; +2.6% y/y. Core +1.6% y/y.
• Eurozone trade balance (sa) €4.3 bln in Mar, vs upward revised €4.0 bln in Feb.
• Portugal unemployment rate rose to 14.9% in Q1, vs 14.0% in Q4-11.

Peter Grant is USAGOLD's resident economist and a well-known analyst globally in the forex and precious metals markets.

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Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

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