A European summit deal to tighten fiscal rules in the euro zone failed to restore financial market confidence after Britain blocked a major treaty change, forcing euro-zone countries to negotiate a fiscal accord outside the Union without the support of Europe’s second-largest economy.
Investor Insights: Global Factors Hitting Gold and Silver.
Moody’s said on Monday that because last week’s summit did not produced decisive initiatives and left the euro area prone to further shocks, it will revisiting the ratings of EU nations in the first quarter of 2012. Also, Standard & Poor’s put more pressure on the region Monday, with its chief economist saying time was running out for the single-currency bloc to resolve shock to get it moving.
The US dollar (NYSE:UUP) increased as the euro headed lower. The SPDR Gold Trust (NYSEARCA:GLD) fell 2.7%, while the iShares Silver Trust (NYSEARCA:SLV) declined more than 3% in afternoon trading. Gold miners (NYSEARCA:GDX) such as Barrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) fell more than 4%. Endeavour Silver Corp. (NYSE:EXK), Hecla Mining Co. (NYSE:HL), and Silver Wheaton (NYSE:SLW) dropped 7.3%, 4.8% and 5.10%, respectively.
India, the world’s largest consumer of gold, reported a decrease in October’s industrial production for the first time in over two years. Output at factories, utilities and mines decreased 5.1% from last year. It was the first decline since 2009 and below the median estimate of a 0.7% drop in a Bloomberg News survey of 24 economists. India’s inflation rate has held above 9% for every month this year. However, once inflation weakens, many expect more monetary easing from India’s central bank. “The only policy authority that we are going to see responding to boost growth will be the central bank,” Robert Prior-Wandesforde, a Singapore-based economist at Credit Suisse Group AG, said before the report. “Once the RBI is content with inflation and is sufficiently worried about growth, we will see it cut interest rates.”
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