Will New Eurozone Fiscal Compact Rein In Runaway Spending?

January 31, 2012

By James O'Dell

January 31, 2012, Los Angeles – The price of Gold eased 0.51 percent or $8.90 to close at $1,729.90 an ounce on Monday, as Greek debt restructuring negotiations dragged on, while 25 out of 27 European Union (EU) member states agreed to a German-backed fiscal discipline treaty that will require euro countries to incorporate balanced budget rules into law. The price of Silver slipped 1.33 percent or $0.45 to close at $33.45 an ounce while the Gold/Silver ratio rose to 51.72 as Silver under-performed Gold.

The EU pact, the fiscal compact, as the new treaty is known in Europe, was agreed to at a summit of European leaders assembled in Brussels on Monday. The United Kingdom and the Czech Republic declined to support the pact, which will go into effect after being ratified by 12 nations, said President of the European Council Herman Van Rompuy, at a press conference on Monday. “The treaty is all about more responsibility and better surveillance. Every country that signs it commits to bringing in a ‘debt brake’ or ‘golden rule’ into its own legislation, and will do so at constitutional or equivalent level,” Van Rompuy said following the meeting.

 “New voting rules and an automatic correction mechanism will enforce compliance more effectively,” he added. While euro leaders made progress in regard to future fiscal discipline, no one has found a way to stop the ever expanding Greek budget deficit. German Chancellor Merkel voiced frustration with the Greek government’s failure to implement its austerity measures, “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”

Meanwhile, Morgan Stanley reported on Monday that it anticipates aggressive monetary policy action by the Fed, including a third round of quantitative easing (QE3) in the first half of 2012, and says it will be supportive of the price of Gold. “We forecast prices to rise on a quarterly average basis through 4Q13,” said Morgan Stanley. Don't leave your assets unprotected during these times of economic and geopolitical uncertainty, invest in physical Gold and Silver bullion and protect your wealth in 2012.

Widely recognized Gold and Silver bullion coins and bars can be bought and sold quite readily at Morgan Gold and they can be easily stored in a safe-deposit box if needed. Did you know you can add physical Gold to your IRA?  Hear Edmund C. Moy, former director of the U.S. Mint, now representing Morgan Gold, speak on Gold and your retirement. Call 1.800.585.1773 and let our team at Morgan Gold help you diversify your portfolio today. Ask about our new Self Directed IRA. 

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