ECB Members Sold Only A Few Ounces Of Gold Last Week - EU Current Account Deficit Explodes

Tuesday, January 31, 2006

The member central banks of the ECB sold gold with a value of 18 million Euros in the week ending January 27 after a pause in the preceding week. The remarkable slowdown in gold sales since the beginning of the year continues with these figures, reported in the weekly consolidated financial statement of the Eurosystem.
The reduction certainly contributes to the steep advance of gold which today trades around $570 an ounce, 11% more than a month ago. Alert me to any investment instrument or market that has done better in January.
The Rich Nations Are Not That Rich Anymore
Looking at the current account deficit in the EU my belief that we have to change long-standing terms gets confirmed. With the US and Europe running current account deficits that are reflected in the current account surpluses of commodity-rich Russia and production powerhouse China the words rich and poor have to be exchanged in a geographical and monetary view.
Eurostat reported yesterday (pdf) that the 25 members of the EU have again recorded a current account deficit of 21.8 billion Euros in the 3rd quarter of 2005, the same as in the 2nd quarter. In a year-on-year comparison the trend looks quite bad: The comparison deficit figure from the 3rd quarter of 2004 is 9.1 billion Euros which means that the deficit has risen an astounding 140%. In comparison to GDP the current account deficit has doubled to 0.8%.
My guesstimate that European consumers are tightening their belts because of higher unemployment and rising inflation was confirmed in local export figures from Austria. Austrian exports have risen 44% since 2000.
As Austria has a strong machinery and special steel industry that is very successful in the Far East this corresponds with my anecdotal evidence which I get from wandering shopping areas in Vienna and talking to acquaintances who all say that their business is declining.
I have the impression that more and more mom-and-pop stores in the retail sector are closing. After standing empty for extended periods the new tenant is either a 1-Euro- or second-hand shop if not a Pizza takeaway or a Kebab grill. Retail in Austria has one reliable group of shoppers left, though: East Europeans. Welcome to the shifting new world.


Wikinvest Wire