Budget cuts are different than asking for more money, which Spain has yet to ask from the ECB. Both look like good reasons for gold to increase.
Gold touched the 20EMA yesterday after several days of worrying if Spain would ask for more money or not, then continued rising Thursday after a delayed announcement of budget cuts.
However, an announcement of plans and an actual enactment of them are two different things. Expect another round of Greece-like argument between Spanish executive and legislative branches resulting in another drop in the PoG before it does resume an upward climb when actual enactment does come + inflationary ECB monies are requested.
If Moody's does downgrade Spanish debt the euro should drop, USD should rise, and gold should... I dunno.
SEP 27 @ 1440: PRECIOUS METALS: Gold Rebounds on Spain Hopes
"Gold futures settled at their highest price in more than six months in New York, while physical gold traded in euros in London hit a record high after Spain announced deep spending cuts in its new budget, fanning investor hopes that it will soon seek rescue financing.
Spain announced a severe round of budget cuts and reforms aimed at convincing international creditors and investors that it is on track to meet its deficit reduction targets. Overall spending will be cut by 40 billion euros ($51 billion) as Madrid aims to cut the country's deficit to 4.5% of gross domestic product* next year."
* Compare to U.S. deficit of 90% of GDP for past 2yrs and likely for the next 5yrs.
SEP 28 @ 0222: Forex Flash: Spain to receive downgrade to junk status? – Westpac
"In addition, there is some chatter about Moody's downgrading Spain to 'junk' rating of Ba1, given that when it cut Spain three notches on 13 June, Moody’s began a three month ratings watch for a further downgrade. “However, the agency said it was waiting for the outcome of the audit of Spanish banks so presumably it would be no earlier than the latter stages of the American session – though of course given the initial response to the Spanish budget, Moody’s may well maintain the rating and switch to a stable outlook.” Callow suggests."
SEP 28 @ 0313 ET: Gold hits one-week high as Spain, oil support
"Bullion is used as a hedge against higher inflation outlook triggered by easy monetary policy.
Spain's budget plan set the stage for a bailout request, bringing relief to investors skittish over Madrid's finances and euro zone's ability to contain its debt crisis. The euro firmed against the dollar after the news, boosting commodities priced in the greenback.
Though some have warned about the high speculative interest in gold in recent weeks and a potential sharp pullback as a result, the medium to long-term outlook for the precious metal remains rosy.
"There is definitely no reason for gold to go back to $1,500 level," said Yuichi Ikemizu, head of commodity trading, Japan, Standard Bank. "I don't see gold going on a spectacular rally right now, but towards the end of year it is likely to hit $1,900 level.""
SEP 29 @ 0602: Gold leads fourth quarter’s likely winners
"“As governments print more and more money, all commodities are rising in price as measured in those currencies,” said James West, portfolio adviser to the Midas Letter Opportunity Fund. “The more money printed, the less investors are going to value paper assets and the more they will seek to hold the real assets — commodities.”
The European Central Bank, U.S. Federal Reserve and Bank of Japan have all announced bond-buying plans in recent weeks, a move which tends to devalue the currencies of the countries undertaking them and adds to the appeal of dollar-denominated commodities.
“Gold has a new demand engine underneath it again, with both the ECB and the Fed printing money on an unlimited basis,” said West. “The looming fiscal cliff of the budget cuts combined with the debt ceiling is also likely to drive investors to gold and silver.”"
SEP 28 @ 0622: Markets await Moody's review of Spanish debt
"The Moody's Investors Service review of Spanish sovereign debt could come as soon as the close of Europe or U.S. markets Friday, say analysts. Moody's said in August its review on Spain's Baa3 rating would continue through the end of September, which is this Sunday. At the time it also said it was waiting on more information on recapitalization needs of Spanish banks, which is coming at 6 p.m. Central European Time (12 noon, U.S.Eastern time) on Friday. A move below Baa3 would drop Spain debt into junk. Analysts at RBS said they expect Moody's to extend its decision until Spain makes a bailout decision. "We expect Moody's to downgrade Spain to junk on any request for a full bailout," they said in a note. Analysts at Commerzbank said expect a later Friday move, saying there should be no downgrade to junk unless the bank recapitalization needs announced later are above €60 billion ($78 billion). "A negative assessment due to the government's reluctance to succumb to European Stability Mechanism conditions is possible, but everything considered, it is a close call with the odds slightly in favor of a rating affirmation now," the analysts said."
SEP 28 @ 1236: U.S. stocks pare losses after Spanish bank news
"Results from Spain’s bank stress test show that banks are mostly solvent and viable and need 60 billion euros ($77 billion) in capital, in line with expectations.
“Stocks celebrated the uncertainty over the Spanish bank stress test, rebounding strongly off their lows,” said Keith Springer, president of Springer Financial Advisors in Sacramento, Calif. Although the banks’s shortfall in capital “is no picnic, it is far better than the worst estimates and what the market feared.”"
SEP 28 @ 1236: Spain banks will need around €60billion in capital
"The recapitalization needs of Spanish banks amounted to €59.3 billion ($76.3 billion), according to results of independent stress tests the Bank of Spain and the Economics Ministry announced Friday. The results came in line with analysts expectations. Recapitalization needs falls to €53.75 billion, when taking into account mergers in progress and tax effects, they said. "The results confirm that the Spanish banking sector is mostly solvent and viable, even in an extremely adverse and highly unlikely macroeconomic setting," said the joint press release."
