Rage against inflation

Egypt is the latest flash point, with talk of a military coup to oust the sitting Islamist President Mursi. The military are demanding he shares power with opponents, or face a military solution.

Protests continue to rock Cairo and other Egyptian cities. As with the riots in Turkey and Brazil, it is hard to be too specific about exact causes; nevertheless, rising prices seem to be a common cause of disquiet in all three countries (recall that the Brazilian protestors cited rising bus fares as a source of their anger). Remember this next time you hear an economist warning that deflation is to be avoided at all costs.

Portuguese bond yields are soaring on news of resignations and instability in Portugal’s coalition government, with one Commerzbank strategist citing this as evidence of “austerity fatigue”. Still, we’ve seen this scenario play out again and again in the eurozone over the last three-plus years, with periodic flair ups in eurozone debt markets – up until the point when the ECB chief pops up and drops either heavy hints about “outright monetary transactions” (code for the kind of money printing seen in the US, UK and Japan). At which point it all quieten downs again, with the euro rising and peripheral bond yields falling.

All of these worries have given gold and silver a leg-up this morning – with the yellow metal probing the $1,250 mark and silver hitting $20.00. A much needed bounce in fortunes for the metals.