Italy’s politics were turned upside down yesterday after the election resulted in the dissident, 5-Star Movement of comic Beppe Grillo creating the strongest party in the country, but left no group with a clear majority in parliament. This political uncertainty weighed on the euro as Italy is the Eurozone’s 3rd largest economy.
Bullion’s gains were limited as investors await the Federal Reserve chief Ben Bernanke’s semi-annual testimony to U.S. Congress before the Senate Banking Committee today, and tomorrow he visits the U.S. Housing Financial Services Committee. A dovish statement from Bernanke will support gold.
European stocks declined as Italy’s inconclusive parliamentary election renewed concern that the region’s sovereign-debt crisis will deepen. This follows falls on Wall Street yesterday and Asian falling overnight.
Huge complacency and even denial about the debt crisis and suggestions that it had been resolved have contributed to investors selling physical gold in recent days.
The Financial Times Alice Ross reported that the “heavy moves last night in currencies were among the worst since the financial crisis.”
Gene Arensberg of the Got Gold Report warned of the market equivalent of seismic tremors and market reversals, including reversals in the monetary metals (see commentary).