Precious metals leap forward as contagion spreads to Italy

  

Now that the waters have cleared for a bit in Greece, where Prime-minister Papandreou is going to form an unprecedented national unity government to push further budget cuts, the European bond vigilantes apparently have started to target the next weakest chain: Italy. The yields on 10 year Italian sovereign debt surged to 6.56% after reaching a record 6.68%. The Italian Prime Minister Silvio Berlusconi will be under-fire tomorrow as the parliament will vote on a state financing bill. His majority within the parliament is weaker by the day and rumors that he would resign hit today's news, only to cause a prompt dismissal.Who is going to bail-out Italy in case it fails? EFSF which receives 140 billion euro in guarantees from Italy ?

Gold is still shiny

After news of strong sovereign purchases as reported by Zerohedge gold managed to work its way up to $1795, just shy of the all time high of  $1920. I`m looking for a cool-off to build back my position as I failed to capture the move in its entirety.

From Zerohedge:

China Gold International Resources Corp, the overseas development arm of state-owned China National Gold Group, the nation's second-largest gold producer, expects to complete its first foreign mine acquisition as early as the end of next month.

The target mine in Central Asia produced mainly gold, with copper as a secondary product, said vice-president Jerry Xie Quan of the Hong Kong and Toronto-listed firm.

"It is a relatively large-sized project," Xie said at the sidelines of the China Mining Congress. "We expect to see results from the acquisition effort before year-end."

China Gold would consider financing the acquisition through bank loans and convertible bonds, he said. The company had net cash of US$76 million at the end of June.

China Gold has two gold mines on the mainland, one in Inner Mongolia and another in Tibet.

Together they produced 55,259 ounces (about 1.57 tonnes) of bullion in the first half, about 10 per cent of the output of its parent. Neither the company nor its parent firm has overseas projects.

Xie said China Gold was also negotiating potential mine acquisitions in Canada and Mongolia, which are either in advanced development or close to starting production.