The Globe and Mail
18.05.12
Investors fled to U.S. dollars, reducing the relative appeal of gold, silver and other commodities priced in greenbacks. Particularly hard hit were the shares of miners that produce precious metals. The S&P/TSX composite index, which is heavily weighted with mining stocks, felt the full force of the downdraft, losing 1.66 per cent.
The ECB report showed European banks are hanging onto the hundreds of billions of euros they have borrowed from the central bank rather than lending it out, an indication of the stress being felt by the euro zone’s financial institutions.
“This is concerning as it may indicate they are preparing for a potential credit freeze where banks are afraid to lend to one another,” said Alfred Lee, an investment strategist at BMO Asset Management Inc. in Toronto.
Precious metals have long been billed as insurance against the prospect that paper money may lose its value, but gold and silver prices have suffered this year as the European debt crisis has heated up and investors have flocked instead to the perceived safety of the U.S. dollar. “Gold and commodities in general continue to run into headwinds due to the recent strength in the U.S. dollar,” Mr. Lee said.
Source: Globe and Mail