Gold reached another record level and continues strain on the eurozone and banks cause financial turmoil on a global level. Investors continue to see the value of gold and flock to the precious metal as a safe haven asset.
Telegraph staff and agencies
5:00PM BST 18 Jul 2011
Gold tipped above $1,600 an ounce in Europe on Monday as investors spooked by the eurozone debt crisis and the threat of a US default piled into the metal as a safe haven from risk.
The spot price reached an all-time high of $1,603.40 at 12.50pm in London, as Italian and Spanish ten year bond yields also ticked-up back towards levels that forced Greece, Ireland and Portugal to ask for help.
Italian and Spanish 10-year bond yields climbed above 6pc, edging closer to the 7pc mark that prompted its smaller euro partners to seek bailouts.
“If we reach 7pc on Spain and Italy, we are probably approaching very quickly the point of no return,” Nicola Marinelli, a London-based fund manager at Glendevon King Asset Management, told Bloomberg.
Scepticism over the latest round of bank 'stress tests' and uncertainty amid a deepening eurozone debt crisis also saw european markets fall, as banking heavyweight Royal Bank of Scotland shed more than 5pc.
City analysts and investors said on Friday that the criteria used in the latest report released by the European Banking Authority (EBA) on Friday were overly optimistic, and omitted the possible impact of a Greek default on the eurozone
The FTSE 100 index of leading shares was down more than 1.2pc by late afternoon, as banking stocks led the Footsie fallers. IT closed down 1.55pc at 5,752.81.
RBS, which has €1.15bn of exposure to Greece, shed 5.19pc to 33.27p, while Barclays fell 4pc to 214.15p and Lloyds shed 4.85pc to 42.5p.
In Europe, Deutsche Bank AG, Germany’s biggest lender, slid 3pc to €35.95 and Italy’s UniCredit SpA lost 5pc to €1.15.
Italian markets were hardest hit. Milan's main index, the FTSE MIB, fell steadily through the day and closed down 3.06pc at 17.885,74, with bank shares the worst hit. Germany's DAX dropped 1.55pc to 7,107.92 and the French CAC 40 fell 2.04pc to 3,650.71, its lowest point of the year.
US stocks opened more than 1pc down, to 12,310.20.
The banking woes came as Spanish and Italian bond yields rose and the euro slid to a record versus the Swiss franc on concern European leaders will fail to agree on measures to contain the region’s debt crisis at a 'special summit' on Thursday.
The head of the European Central Bank, Jean-Claude Trichet called on eurozone leaders to speak with one voice in the debt crisis, while defending German Chancellor Angela Merkel against accusations of foot-dragging.
"There is an absolute need to improve 'verbal discipline'," Jean-Claude Trichet said in an interview.
"The governments need to speak with one voice on such complex and sensitive issues as the crisis," he said, while acknowledging that having 17 different governments made things "complex."
Over the weekend Poul Thomsen, the International Monetary Fund's mission chief to Athens, said that Greece's finances were on "a knife edge." Last week the IMF said Greece needed an extra €100bn (£88bn) of aid on top of the €110bn bail-out package agreed last May. Greece is already being crushed under its €350bn debt pile.
The 17 eurozone nations are due to hold a crisis summit in Brussels on Thursday to agree fresh support for Greece and urgent measures to prevent contagion spreading to Italy and Spain – the third and fourth biggest economies in Europe respectively. On Friday Italy passed a €48bn austerity budget aimed at radically reducing the public deficit by 2014.
George Papandreou, the Greek prime minister, repeated a call for urgent and unified action. "It is time for Europe to wake up," he said in an interview.
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