HSBC Predicts Gold Rally To $1,900+ By Year-End

There are increasing signs that Spanish Prime Minister Mariano Rajoy appears amenable to a European-Union bailout for Spain, despite the fact that this would mean to all intents and purposes relinquishing his government’s remaining fiscal sovereignty to Brussels. The FT’s David Gardner notes that Rajoy’s government has “the feel of a government approaching the end of its terms” – despite being a majority administration that’s only been in power for seven months.

Gardner’s article quotes a former editor of El Pais who expresses concern at the PM’s inability to articulate a viable recovery plan: “one sometimes gets the impression that Rajoy speaks in public as if he was addressing a parish where the internet has yet to arrive.”

That said, the magnitude of Spain – and indeed Europe’s – debt problem means that a silver tongue can only take a politician so far. No amount of verbal chicanery can disguise the serious financial straits governments all over the developed world are in.

HSBC predicts that the gold price will return to territory north of $1,900/oz by the end of the year, as a result of geopolitical and economic uncertainty, as well as the looming US “fiscal cliff.” Washington’s is only one aspect of America’s problem, as many of the largest US states are also drowning in debt, deficits and “unfunded liabilities,” as examined in a new report from “The State Budget Crisis Task Force” – a group headed by Dick Ravitch and former Fed chairman Paul Volcker. You’ll be hearing a lot more about US state debt in the years ahead, to add to all the other landmines littering the political-economic scenery.

It would be amiss on this fine August morning to not draw your attention to today’s FT front-page headline: “US set to drop 4-year probe into silver price.” This is referring to the US Commodity Futures Trading Commission’s investigation into silver price manipulation by big banks. The FT provides much analysis of this, as do informed bloggers. Who’s right? You decide.