All-Time High in Gold Signals Persistent Risk Aversion
Source: Oil N' Gold (5/12/10)
"Gold surged to a new record-high. . .amid lingering woes over Greek sovereign crisis"
Despite positive market reactions after EU and IMF announced the 750B euro stability package, rallies in risky assets lost steam quickly. It indicates that investors are skeptical about the effectiveness of the plan in containing the crisis. Economists in the street comment that the main problem in Europe is 'solvency' rather than 'liquidity.' Therefore, the government should find ways to reduce deficits and the package does not really address the real problem.
In the medium- to long-term, economic recovery in the Eurozone remains fragile. In IMF's report released earlier this week, 'aiming to stabilize public debt in the short run is neither feasible nor desirable, given the risk of a relapse into recession and the magnitude of the required fiscal retrenchment. . .however, sustainability indicators are flashing warning signs about the public debt in most countries, and sizable consolidation efforts are needed in the medium term.' The world lender said Europe's performance remains 'weak compared with the recoveries under way in other parts of the world.'