Weekly Gold and Silver Market Recap for Aug 24, 2012 By Nicholas Wilsey


Contact Nicholas at Nicholas.Wilsey@APMEX.com

Gold prices move upwards on market news:

Gold has had quite a week of positive gains this week. Starting the week around the $1613 per ounce and at mid-day Friday the yellow metal was around the $1672 per ounce. On Tuesday the Gold price was at a two month high, tracking the euro upward. VTB Capital analyst Andrey Kryuchenkov said, “A break above $1,630 is very significant, as we breach the June-July and early August range. Buy orders were triggered, with the dollar index also slipping below support … at early July lows. This is on speculation that the ECB (European Central Bank) will act.” Kryuchenkov went on to say that as normal, Gold is trading against the dollar in this case. As the week went on, so did the upswing in the gold market. The gold price has moved more this week than in the past four months. The movement reflects growing eagerness for the Federal Reserve to provide further stimulus measures to boost the economy. Adam Klopfenstein at Archer Financial Services Inc. said, “Gold is exploding as inflation concerns are back. A combination of rising commodity prices and the chances of more easing coming in the U.S. is stoking inflation worries.” Michael Gayed of Pension Partners LLC said, “Gold is surging on renewed expectations of inflation rising after easing.” During two rounds of quantitative easing, from December 2008 to June 2011, the Gold price jumped 70 percent. All eyes continue to be on the Fed’s Jackson Hole, Wyo., economic symposium for more signs of QE3. That meeting is to be held late next week.

Europe had a rare positive week:

In Europe, there was an unusual sight in the financial reports: Positivity. The euro jumped to a seven-week high on the hope that the European Central Bank will be able to help the struggling region with a stimulus package. “The market has moved to the belief that (the ECB) is going to do whatever it takes,” said William Larkin, fixed-income portfolio manager at Cabot Money Management in Salem, Massachusetts. There are meetings scheduled in the next few days between leaders in the area to discuss possible options. Spain has begun negotiations with eurozone partners over the requirements necessary to lower its borrowing costs, but that country has stopped short of requesting an official bailout. The strategy currently in favor includes a combined attack by the European rescue fund (EFSF) and the European Central Bank (ECB) as they purchase Spanish debt in the primary and secondary markets. Spain’s borrowing costs are at record levels since the launch of the euro 13 years ago. “Negotiations have started and are well under way. Right now, the preferred option, the one that is being actively discussed, is for the EFSF to buy bonds on the primary market and for the ECB to buy bonds on the secondary,” one of the sources told Reuters on condition of anonymity. Two of the main players in the European talks met this week. German Chancellor Angela Merkel has engaged in talks with Greek Prime Minister Antonis Samaras with both asserting their allegiance to the euro.

 

The United States Federal Reserve ponders more monetary easing:

The precious metals markets saw an upswing this week and one of the main components of that was the idea of another round of monetary easing from the U.S. Federal Reserve. In prior cases of easing the effect to metals were positive. Easing is used to stimulate the economy and is based on how the good or bad the economic conditions are. One of the main issues the Fed has had to deal with is the mixed signals reports have shown as of late. There was a report that showed leading economic indicators in the country were up 0.4% in July. This report is considered a good indication of the outlook of the economy. “The expansion continues, no double-dip recession, just continued moderate, sub-par growth,” said John Silvia, chief economist at Wells Fargo. Then the release of the weekly jobless claims report was released. After an upward revision from last week’s numbers, the report showed increases across the board in new claims, existing claims, and the four week moving average. The jobless numbers gave way to more talk of easing.  Even people inside the Federal reserve were sending mixed messages. The St. Louis Federal Reserve president said that more easing may be unnecessary. Today, one of the longtime supporters of further quantitative easing by the Fed, Chicago Fed President Charles Evans, stated his view on the matter. “The outlook for growth is 2 percent, if we are lucky 2.5 percent, over the next 18 months to two years. Back in the spring, we thought it was going to be 2 1/2, 3 percent. … We stepped down our outlook; unemployment is 8.3 percent; there’s a lot of reason to do more,” he said. Next week Federal Reserve Chairman Ben Bernanke will speak at the annual meeting in Jackson Hole, WY. “Given all the mixed messages, the Jackson Hole symposium next Friday is building up to be a key event as we look forward to the latest download from the chairman himself,” said James Reid of Deutsche Bank.