Gold Hits $1600 as Debt Fears Deepen in Europe, US

Gold hits the $1600 level on safe haven flows escaping the US & Eurozone debt fears. Bank stress tests prove to be anything but, as attention turns to Greeces second bailout, US debt ceiling discussions remain in stalemate, UK house prices slip back, New Zealand CPI hits 21 year high.

Fridays European banking stress tests turned out to be anything but stressful with only 8 banks from 91 tested falling below the minimum tier 1 ratio of 5% and another sixteen needing at least 25.8bn of extra funds to get their tier 1 capital ratios above 6%.

Despite widespread scepticism about the credibility of the tests, with no Irish or Portuguese banks failing the main focus this week will be on this weeks meeting with respect to another 100bn bailout of Greece.

There remains widespread disagreement between the European Central Bank, who remain opposed to any type of default, and the Bundesbank who rule out any type of Eurobond plan that would underwrite all peripheral debt at what they see as at taxpayers expense.

In a sign that markets are losing faith with politicians ability to get on top of the crisis Italian 10 year bond yields continued to rise even after the passing of the austerity budget in the Italian parliament. It is a worrying development for Europes third largest economy and a sign that Prime Minister Berlusconi has lost the confidence of the markets and is seen as a liability.

In the US things arent much better with continued wrangling between Democrats and Republicans over the raising of the debt ceiling. The Republicans are set to vote on their own $2.4trn worth of cuts in the House they control, which in reality means nothing given that it would not pass through the Democrat controlled chamber. President Obama remains committed to including tax rises in any new measures, something the Republicans remain ideologically opposed to.

In the UK in further signs of a slowing economy Right Move house prices for July fell 1.6%, wiping out Junes gain of 0.6% and highlighting the precarious state of the UK economy in the face of rising prices and economic uncertainty. These figures would seem to reinforce the Bank of Englands concerns about the UK economy ahead of the release of the latest minutes this Wednesday.

New Zealand CPI hits a 21 year high at 5.3% year on year, rising more than expected and sending the kiwi to new record highs against the US dollar.

Arabic speakers can watch Ashraf today on AlArabiya at 11:40 GMT (15:40 Dubai Time).

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