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Will the European debt crisis keep the world’s financial markets uncertain and volatile?

*Reuters, November 9, 2011

‘Gold edged higher on Wednesday on persistent doubts about Italy’s ability to tackle its debt crisis as political uncertainty and soaring Italian bond yields prompted caution among investors.

Italian Prime Minister Silvio Berlusconi, viewed by many in the markets as an obstacle to economic change, has pledged to resign after parliament passes budget reforms but his exit as leader of the euro zone’s third-largest economy raised questions about a successor and possible political instability.

A failure by Italy to fix its debt problems would have a far bigger impact on the region than difficulties in Greece.

Spot gold rose 0.6 percent to $1,796.39 an ounce, from $1,784.85 late in New York on Tuesday, just off Tuesday’s high of $1,802.60 — its strongest since late September.

The euro slipped as the dollar rose across the board after the yields on 10-year Italian bonds hit 7 percent, a level at which countries including Portugal and Ireland were forced to ask for financial help. Yields pulled back after the European Central Bank (ECB) intervened in the markets.

The swift rise in bond yields prompted Paris-based clearing house LCH.Clearnet to raise the initial margin call on Italian bonds, effectively driving the cost of using Italy’s debt to raise funds higher.

‘The market is extremely worried.  Changing leaders both in Greece and Italy doesn’t change the fiscal situation and leaves us with a period of uncertainty,” said Ole Hansen, senior manager at Saxo Bank.

Keeping concern about the sovereign debt crisis alive, a plan for former ECB vice-president Lucas Papademos to lead a Greek government of national unity has run into trouble, party sources said, prolonging the political hiatus as the country heads towards bankruptcy.

Gold hit a record around $1,920 in September on worries about a growing debt crisis in Europe and is trading more than 25 percent higher in the year to date.

Spot gold prices have rallied around 4 percent so far this month as mounting doubts over the euro zone’s ability to tackle its two-year-old debt crisis drove investors to safe-haven assets and decoupled gold from other commodities, which it had followed through much of the past two months.”

*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.