Europe divided on Friday in a historic rift that will leave Britain isolated while a large majority of countries led by Germany and France agreed to forge ahead with plans for a new treaty that will create a tighter fiscal union, which leaders hope will preserve the euro. Twenty-three of 27 leaders representing each state in the union agreed to pursue tighter integration with stricter budget rules for the single-currency area, while Britain said it could not accept proposed amendments to the EU treaty after failing to secure concessions for itself. Sweden, Hungary, and the Czech Republic said they needed to consult their parliaments before making a decision.
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After ten hours of talks that went through the night, all 17 members of the euro zone, as well as six countries that aspire to join, resolved to negotiate a new agreement alongside the EU treaty that would impose a tougher deficit and debt regime. German Chancellor Angela Merkel, who created the fiscal compact proposal with French President Nicolas Sarkozy, said she was very satisfied with the decisions. The world will now see that Europe has learned from its mistakes while avoiding a “lousy compromise,” she said, adding that she still hopes Britain will eventually agree to change the EU treaty to anchor stricter budget discipline.
In afternoon trading, the SPDR Gold Trust (NYSEARCA:GLD) edged .35% higher, while the iShares Silver Trust (NYSEARCA:SLV) gained 2%. Gold miners such as AngloGold Ashanti Ltd. (NYSE:AU) and Yamana Gold, Inc. (NYSE:AUY) increased .60% and .38%, respectively. Iamgold Corporation (NYSE:IAG) jumped 2% as the company announced a 25% increase to its annual dividend. It is the company’s third dividend increase in only 12 months. Silver miners (NYSEARCA:SIL) such as First Majestic Silver (NYSE:AG) and Endeavour Silver (NYSE:EXK) increased 6.3% and 4.05%, respectively.
According to Bloomberg, gold traders are more bullish on the precious metal as it offers protection from the debt crisis and counter-party risk. “Eighteen of 26 surveyed by Bloomberg expect the metal to advance next week, the highest proportion since Nov. 11. Holdings in exchange-traded products backed by gold rose 108.6 metric tons to a record from the start of October, the most since the second quarter of 2010, data compiled by Bloomberg show. The extra bullion is valued at $5.99 billion.”
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