Precious metals recovered from early losses this morning after the release of the Consumer Price Index showed the smallest year-over-year increase in nearly two years. The better-than-expected report could support the Federal Reserve’s looming decision on another round of monetary stimulus. Also, a key business gauge contracted unexpectedly for the first time in nearly a year. The “Empire State” index showed a drop to minus 5.85 from 7.39 last month.
Quantitative easing (QE) from either the European Central Bank (ECB) or the Fed seems to be the key factor in a rally for the price of Gold. Should either central bank announce a round of QE, prices are likely to increase due to the results of such action all being supportive of the Gold price. Investors shouldn’t be surprised to see action from Europe before the U.S., however. London’s Marex Spectron said in a note, “The eurozone appears to continue to struggle, while the U.S. keeps surprising the market with positive figures. This only enhances the chance the the ECB is more likely to act before the Fed.”
Matthew Lynn of Marketwatch writes that the euro as a currency is much like a zombie. He writes, “Some countries can’t use the euro for imports because of fears that drachmas or lire may suddenly replace euros.” Lynn explains that oil traders, for instance, may be wary of selling oil to a country like Greece, because when payment is due six months down the the road, they may not be paying in euros, but in something worth far less. “When a currency stops working the damage done to the economy is immediate. Trade stops flowing. Investment gets postponed. Capital flees. Very quickly, unemployment starts to rise, and output declines. That is exactly what is happening in the eurozone right now,” he writes.
At 9 a.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1,601.10, Up $0.20.
- Silver, $27.92, Up $0.05.
- Platinum, $1,398.70, Down $1.50.
- Palladium, $577.90, Down $2.00.