Easing immediate fears of a credit crunch, banks gobbled up nearly 490 billion euros in three-year cut-price loans from the European Central Bank recently. However, it is still not clear how much will flow to needy euro zone economies.

Hopes of crisis relief before the year-end had been pinned on a massive uptake of the ECB’s ultra-long and ultra-cheap loans after a string of failed attempts by euro zone leaders to thwart market attacks on the bloc’s weaker members.

The funding should bolster finances of banks and ease the threat of a credit crunch and may tempt them to buy Italian and Spanish bonds, thereby easing the sovereign debt crisis of the currency area.

Tags: cheap loans, credit crunch, debt crisis, euro zone, European Central Bank

On Tuesday, gold held steady with prices struck in a narrow $15 range over three sessions as investors stayed on the sidelines amid the year-end holiday season watching for developments in the euro zone debt crisis.

Spot gold edged down 0.1 percent to $1,603.29 an ounce by 7:32 p.m. EST and U.S. gold was little changed at $1,605.20.

Gold and silver speculators cut their bullish bets for the third running week in the week to December 20, with silver net long positions down by more than half, according to the U.S. Commodity Futures Trading Commission.

The largest gold producer of the world, China, churned out 31.75 tons of gold in October, bringing the output in the first 10 months of the year to 290.752 tons, up 4.96 percent from a year earlier.

Tags: Commodity Futures Trading, debt crisis, euro zone, gold, holiday season, spot gold

Italy and Greece technocrat leaders rushing to form governments would be facing a critical test of their ability to limit the damage from the euro zone debt crisis when financial markets open in Europe on Monday.

The President of Italy asked former European Commissioner Mario Monti on Sunday to form a government for restoring market confidence in economy of the country.

Investors will pass initial judgment on his leadership when Italy’s Treasury asks investors on Monday to bid for up to 3 billion euros ($4.1 billion) in five-year government bonds. At an auction last week, the government’s borrowing costs surged above 6 percent and kept rising to levels well beyond what the country could afford to pay over the longer term.

In Asia, stocks and the euro rose on hopes that Monti and Greece’s new prime minister, Lucas Papademos, would take decisive action.

“Symbolically perhaps it’s (Berlusoni’s exit) a positive — it sends the message that it’s putting a certain chapter behind them but the fact remains is that this is difficult medicine to administer and it doesn’t really matter who gives the order, it’s going to be a difficult pill to swallow,” said Jack Ablin, chief investment officer at Harris Trust in Chicago, which oversees $50 billion.

Tags: borrowing costs, debt crisis, euro zone, market confidence

Asian shares inched up while the euro clung to overnight gains on Friday but markets largely stayed within range as investors are awaiting a weekend meeting of European leaders for signs of progress in resolving the region’s debt crisis.

Gold and copper rebounded from the sharp falls of Thursday.

From news.yahoo.com:

European leaders said they did not expect Sunday’s meeting to give an all-cure solution to the euro zone‘s debt problems, with regional leaders still sharply divided over how to strengthen a euro zone rescue fund.

France and Germany said in a joint statement on Thursday that the leaders will discuss in detail a comprehensive solution to the euro zone crisis at the summit on Sunday but no decisions will be adopted before a second meeting to be held by Wednesday at the latest.

Paris and Berlin wanted negotiations to start immediately with the private sector for an agreement on the sustainability of Greece’s debt, according to the communique.

“Assets across the board are coming under pressure as it becomes clear that European banks, when faced with a stress test, will likely reduce their assets to strengthen their capital,” said Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory Co.

Tags: debt crisis, euro zone

After euro zone policymakers moved to shore up struggling banks and fend off a financial crisis, Asian stocks rose on Friday and the euro clung to gains from a 2-cent rally.

On Thursday, the European Central Bank (ECB) announced aggressive liquidity measures to throw a lifeline to lenders who have seen wholesale funding drying up as market confidence ebbed, and the European Union said it would present a plan for a coordinated recapitalization of banks by member states.

From in.finance.yahoo.com:

Gold, oil, copper and equities were all on course to post weekly gains on hopes that Europe’s leaders may finally be getting to grips with a two-year-old sovereign debt crisis, although the scale of the task meant caution remained high.

“There are still plenty of problems that face the European financial system,” said Greg Gibbs, strategist at RBS in Sydney. “The risk rally will probably run out to steam in the next week.”

Fears that the crisis is heading inexorably towards a default by Greece — and possibly others — that could trigger turmoil in the banking system have caused a sharp sell-off in riskier assets since late July.

U.S. stocks rose more that 1.5 percent on Thursday and S&P 500 index futures traded in Asia were mildly negative. “No one wants to take a big position ahead of the U.S. jobs report later in case there is a downside surprise,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo.

Tags: debt crisis, euro zone, liquidity measures