Gold price in euros makes new high at €1,350 per troy ounce

Europe´s sovereign debt crisis is escalating and spreading. Juergen Stark, chief economist of the European Central Bank (ECB), resigned on Friday. According to the official statement, Stark gave up his post because he did not endorse ECB purchases of government bonds issued by insolvent euro zone countries. He was also opposed to the creation of a permanent euro-bailout fund.

Axel Weber, Germany´s former Executive Director at the ECB, resigned half a year ago, now Stark adds his name to the list, foreshadowing growing German opposition to Eurobonds, euro-QE, European fiscal union and money printing. The euro lost ground again and dropped to 1.35 against the U.S. dollar. While the U.S. dollar index rose by 1.2% to 77.20 at the end of last week, the greenback´s relative strength weighed on the dollar gold price. which fell as low as $1,825 per troy ounce at the New York Comex on Friday.

Gold and other precious metals are in demand as safe havens in the wake of a worldwide deteriorating debt crisis. Some market participants seem to believe that the strong rally in gold prices in recent months may have led to an overheating of the yellow metal’s price. Nevertheless a growing number of investors continue to shift capital into the gold sector, since the yellow metal does not face any default or credit risks. In addition, investors are buying gold and silver because of their monetary character and store of value function in times of constantly depreciating fiat currencies and economic uncertainty.

Stark’s resignation has raised questions over the euro’s chances of survival without Germany’s monetary “man of iron”. Governments of euro zone member countries face a growing challenge to convince their populations to make the necessary sacrifices to save the euro. In Germany, leading members of Germany´s junior coalition partner FDP announced on Friday that they will ask their 66,000 members to vote on the establishment of the permanent bailout fund ESM. Should a majority of FDP members vote against, Germany´s government led by Chancellor Merkel's CDU would likely fall apart. In France’s upcoming presidential elections, the Front National could emerge as the big winner according to recent polls. The FN has campaigned strongly against the euro. So with opposition to the common currency growing in the euro-core and with the euro-periphery facing impending defaults, bankruptcies and upheaval, there are real reasons to doubt that the 12 year old currency will live to see sweet sixteen.