Gold and Silver Bullion in Hedging Currency Markets

One of the bigger influences on gold and silver bullion may be the volatility in the currency markets, which is considerable given the recent developments in the European Union. Greece is essentially being forced out of the European Union after being saddled with a large amount of debt and after its citizens have been forced to endure austerity measures to qualify for bailouts and loans from other European nations.

This has already caused extraordinary fluctuations in the currency markets, which are the first markets to react to any change in the system. If there is instability in Europe, it is first felt in the currency, the Euro. The Euro is traded on a daily basis with every other major currency and thus affects them.

Lately, gold has cooled, somewhat, falling by 1.3 percent last week despite a rise on Thursday and Friday. Silver was also down on the week and gold and silver ETF’s were also down. The action in currency markets, however, promises to overshadow that activity in new ways.

Anyone familiar with currency markets in the past week has seen a lot of bloodshed in the Euro. The Euro is now at a twenty-two month low, which is incredibly significant in currency markets. During the past twenty-four hours as markets reopened after the weekend, there has been a significant rally, but that action is probably not sustainable given the current activity in markets.

In the event of a Greek exit from the European Union, the flight from the Euro would be immediate and swift, producing the kind of trading volume that has not been seen in currencies in multiple decades. In many ways, the market now is front-running that eventuality as the Euro sinks to twenty-two month lows.

We will see the current correction in both the gold and the silver market slow down as volume increases in hedging efforts against volatility in the markets. Investors had been on a slight reprieve from panic buying in gold and silver during the first quarter of 2012, but that trend is looking to subside. The troubles in the Euro will continue and persist to new lows that surpass the current multi-year record and gold and silver bullion will be trading higher commensurately.

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