Gold futures in New York were driven to a three-week high on Monday as ongoing concern about Greek sovereign debt heightened the safe-haven appeal of the metal.
But Greece is not the only problem for Europe where the threat of sovereign default and contagion increases by the day, says GoldCore, the Ireland-based precious metal specialist.
Here's their analysis and the likely consequences for gold demand in the foreseeable future.
"Greece is facing the threat of further severe austerity measures and a plan for unprecedented outside intervention including in the collection of tax and wholesale privatization of Greek state assets. The severity of the plan and the fact that it would in effect spell the end of Greek sovereignty and a forced move towards a European fiscal union may lead to its rejection by opposition Greek parties who may seek a fairer alternative.
Greece is just one of the sovereign debt crisis facing the Eurozone. Portugal and Ireland are bracing for debt crisis contagion to reach their shores and in both countries the crisis is deepening.
Portuguese bonds have come under heavy selling pressure again this morning with 10 year bonds rising to 9.822% and two-year note yields were 21 basis points higher at 11.53% this morning. The spread or yield difference between German 10-year bunds and Portuguese securities of a similar maturity widened to a record over 678 basis points in London this morning. This is the highest since Bloomberg began collecting the data in 1997.
In Ireland, Transport Minister Leo Varadkar sparked alarm and confusion over the weekend when he said the government may need further funding from the European Union and IMF next year as Ireland will be shut out of bond markets for 2012 and possibly even in 2013.
Irish 10 year bond yields surged over 11% last week and remain over 11% at 11.07% this morning.
Punitive "bail outs" have clearly not worked and have simply managed to transfer massive debts from profligate banks to western nations taxpayers who were already struggling with very high debt levels.
A continuation of these misguided policies makes a second more dangerous phase of the global debt crisis increasingly likely and means that diversification into gold remains prudent and safe haven demand for gold will remain robust for the foreseeable future."