1.27.12 Weekly Recap

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photo credit: Reuters/ Mike Segar

Gold crossed over the $1700 mark today on news of more stimulus measures by the Federal Reserve.  This news pushed the dollar down; Gold played its usual inverse position by jumping up several days in a row.

Precious metals started the week with a climb that was based on European news.  Negotiations between Greece and private debt holders are still under way. Sources close to the situation report a deal is close and private bondholders stand to take a loss of between 65 to 70 percent.

The Federal Reserve officially announced that the interest rates will not be raised until at least 2014.  The Fed believes that the unemployment rate still needs to be controlled. It anticipates that inflation will remain consistent with firm prices. The Federal Reserve’s actions indicate that they are concerned about a struggling economy, and unfortunately, this depresses the value of the dollar which had been rising compared to the euro. Federal Reserve observers are split on whether there will be another round of quantitative easing. According to the CNBC survey in January, about half of the respondents believe there will be a QE3, while 44 percent say no. These same respondents are optimistic on the economy, as long as the European crisis does not turn for the worse and create a significant global event.

The International Monetary Fund cut its global forecast of 2012 growth from 4% to 3.3%, and already is dropping its projected growth forecast for 2013 from 4.5% to 3.9%. Those forecasts are still not set; they are dependent on the efforts of the 17-country euro zone coming together to fight financial turmoil. The IMF has also called on the European Central Bank and other countries to support the euro zone with additional funding. In an update, the IMF said, “The near-term outlook has noticeably deteriorated … The global recovery is threatened by intensifying strains in the euro area and frailties elsewhere.”

WEEKLY SPOT PRICES

Gold: Spot Gold prices opened this week at $1,678.40. The high was on Friday, 27th at $1,738.20, while the low for the week occurred on Wednesday, Jan. 25th, $1,649.20. Gold ended the week up $60.50 at $1,738.90. This week, the most popular Gold bullion products were 2012 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2012 1 oz. Gold Maple Leafs.

Silver: Spot Silver prices opened this week at $32.37. Silver reached a high of $33.94 on Friday, Jan. 27th, while this week’s low for Silver occurred on Wednesday, Jan. 25th at $31.53. Silver ended the week up $1.67 at $34.04 The most popular Silver products on APMEX.com this week were 2012 Silver American Eagles, 2012 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Platinum: Spot Platinum prices opened this week at $1,565.00 and ended the week up $60.80 at $1625.80. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Palladium: Spot Palladium prices opened this week at $687.80 and ended the week up $3.60 at $691.40. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

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The unusual Silver bullion coin, the Silver Kookaburra, was released in 1990 by the Perth Mint of Australia. These beautiful coins celebrate the interesting bird native to Australia. Due to the variety of designs and privy marks available on the Silver Kookaburra coins, these are very popular among collectors who buy Silver coins.

Each 1 oz. Australian Silver Kookaburra contains .999-fine Silver and includes proof-like frosting in the central design. The obverse features a portrait of Her Majesty Queen Elizabeth II and lists the face value of the coin. The reverse displays the kookaburra. Every year, the coin has a slightly different design, which makes the Silver Kookaburra coins attractive to collectors. From 1990 through 2010, only 300,000 coins were minted each year; the 2011 and 2012 versions have mintages of just 500,000.

The Perth Mint originally began in 1899 as a branch of Britain’s Royal Mint in order to help supply the Gold sovereigns and half sovereigns, which were used as everyday circulating coins throughout the British Empire. In 1970, control of the mint passed from Britain to the Western Australian Government.

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Is Your Portfolio Ready for 2012?

Accelerating U.S. Debt Load Could Mean A Riskier Economy

Many economists and investors have been focused on the debt crisis in Europe. But did you know that debt in the United States is now more than 90% of GDP, a sign of increasing economic risk? In fact, the gap between debt and GDP has narrowed considerably over the past two years (see Chart 1 below). This is placing increasing strain on the U.S. economy. Is your portfolio prepared to weather this uncertainty? Now is the time to review your portfolio and make sure you’re adequately diversified among stocks, bonds, cash and Gold — the fourth asset class.

In today’s video, APMEX Chief Executive Officer Michael Haynes talks about how growing debt levels in the U.S. are creating greater uncertainty in our financial markets. He also explains how a diversified asset allocation may help minimize risk in your portfolio.

Click to Watch

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1.13.12 Weekly Recap

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Molten Gold Pour. photo: Flickr.com- Ashvin Mistry

Gold broke the recent trend of following the euro’s movements against the U.S. dollar, thanks to safe-haven investment demand that originated from the renewed jitters in Europe. Economic expectations are pessimistic with inflation rising internationally and economic growth declining globally. Investors are searching for a safe-haven investment, such as precious metals. According to Sundeep Sikka, with Money Manager (India) Inc., “The current global macroeconomic environment is very conducive for higher Gold prices.” Frank Holmes of U.S. Global Investors echoed this sentiment, saying, “People get so caught up with the next three minutes for Gold, and they should really be focused on the next three years. Does anyone really believe in the long-term strength of the U.S. dollar?” Holmes said the Gold price could double within the next five years. Investors are buying U.S. bullion coins at the fastest pace in over two years, and China is importing more Gold than ever.  One analyst noted, “The thing that’s caught people’s minds is the massive increase in Chinese buying.  Gold has demonstrated time and time again its ability to hold purchasing power.” A poll of 164 investors conducted by Nomura showed that 19.5% of them prefer to buy Gold and hold it until the end of the year. The poll compared Gold, bonds and stocks as investment choices.

The United States reached a “symbolic tipping point” as the country’s national debt surpassed $15.23 trillion, which is nearly equal to the value of its entire economy. Debt projections estimate that the U.S. economy grew to around $15.3 trillion in December, a figure the debt level is expected to surpass in January. Estimated retail sales figures for December were not quite to the levels anticipated, and a reported increase in jobless claims defied expectations. The U.S economy is facing several obstacles to successful growth, including a high unemployment rate, low demand in the housing market, and the European debt crisis. Economists will be evaluating their fourth quarter gross domestic product estimates after data was released Friday morning showing that U.S. exports declined in November, and imports rose.  The U.S. trade deficit is at its widest in six months, and is higher than the consensus expectations of economists.

The Federal Reserve’s modifications to its communication approach are drawing favorable reviews, with the Fed indicating that it will provide updates four times a year on its plans for short-term interest rates. According to the Fed, the U.S. economy is expanding at a modest pace. The main crux of further improvement continues to be a less-than-stellar jobs market, which has prevented incomes from rising. Residential real estate is still viewed as sluggish, but commercial property markets have shown improvement. Consumer confidence was generally “characterized as firmer than in recent reporting periods.” Transcripts released from the Federal Reserve policy meeting showed that as late as December 2006, top Fed officials including Chairman Ben Bernanke believed that the housing market was stabilizing and failed to anticipate the subsequent housing crash. Fed policymakers were seemingly oblivious to the threat housing represented to financial markets and the economy. The housing market’s crash resulted in a U.S. banking crisis and the biggest recession this country has seen since the Great Depression, as well as a corresponding increase in the price of Gold.

The German Chancellor Angela Merkel and French President Nicolas Sarkozy met to discuss Greece’s unresolved debt issues and to create a plan to ensure that the euro survives a potentially failing banking sector. The announcement was made that Greece would not receive its second bailout package (which would prevent a debt default in March) until Greece reaches an agreement with creditor banks on a bond swap. This week’s bond sale in Italy was not as successful as investors had anticipated. Even though Italy met the planned amount of 4.75 billion euros, hopes had been that the sale would bring in twice as much. The European Central Bank (ECB) decided to keep its key lending rate at 1%.  Afterwards, ECB President Mario Draghi warned of the “substantial” downside risks to the eurozone’s economic outlook, including increased debt market tensions, and stated that although there are “tentative signs of stabilization,” uncertainty remains “very high.” Fitch Ratings expressed that the ECB needs to do more to help Italy, the next big euro zone country seemingly in danger of default. The head of sovereign ratings for Fitch, David Riley, described a potential collapse of the euro as “cataclysmic.”  A French newspaper published a story that said that Standard & Poor’s would be downgrading France’s “AAA” credit rating by one notch.  Although the paper didn’t cite any sources and an official announcement wasn’t scheduled until late Friday afternoon, stocks experienced a triple-digit drop.  Gold and Silver saw drops as well, although they quickly climbed back up to the levels they were at before the news was released.  The expectation is that several other euro zone countries will be downgraded; this could force investment funds to sell bonds because they have a requirement that a set percentage of their bonds be AAA-rated. For those countries that would be affected, this could raise their borrowing costs. At a time when debt is rising and GDP (income) is declining, the last thing these countries need is for borrowing costs to rise.

Several hedge funds indicated that they are not willing to accept International Monetary Fund (IMF) proposals to bring Greek debt down to affordable levels by taking a voluntarily 50% loss on bond holdings. Instead, the hedge funds would prefer to either let Greece go bankrupt in the hopes that the hedge funds will be covered by the credit insurance they bought to protect against loss, or to get others involved and force the issue so that the funds will get paid in full. It’s a dangerous game being played by two parties with completely different interests. The hedge funds are focusing on what is best for their clients, and the IMF is trying to fix the entire sovereign debt problem in Europe. Greece is preparing to start final talks that could affect whether that country stays in the euro zone. In a move that will probably not sit well with German constituents already opposed to Germany’s role in the Greek bailout, German Chancellor Merkel announced that Germany would be willing to pay more funds to help conclude negotiations over the European Stability Mechanism (ESM) permanent bailout fund. The Greek bailout is viewed as the key solution before the European Union can work toward growth and job creation.

Tensions continued to grow in Iran, as one of the country’s nuclear scientists was killed by a car bomb on Wednesday. The bombing came as sanctions were being toughened on Iran because of its nuclear program. Although no one has claimed responsibility for the attack, Iran immediately blamed the U.S. and Israel.  U.S. Secretary of State Hillary Rodham Clinton has denied any American role in the slaying, and the U.S administration condemned the attack. However, Israeli officials, without admitting involvement, have hinted at covert campaigns against Iran, and Israel’s military chief of staff said that similar “unnatural” events could be expected this year if Iran continues along its path of nuclear development. The U.S. is looking for support from the Japanese government on imposing economic sanctions against Iran for its nuclear development program, as Japan is one of the top-three buyers of Iranian oil. President Barack Obama announced this week that the U.S. would freeze out financial institutions that deal with Iran’s central bank.

Recent data from China shows an increase in that country’s trade surplus for December.  Although expectations were met on export growth, import growth declined sharply. China is often seen as a major component of a global economic recovery. Barclays Capital Analysts said, “…the Chinese economy remains on track for a soft landing, with external weakness continuing to pose the biggest downside risk.” The U.S. and its allies are looking to impose stronger sanctions on Iran due to that nation’s nuclear ambitions, and China, as Iran’s top trade partner, seems to be caught in the middle. Hua Liming, former ambassador to Iran, said, “Iran will expect China to support its interests at the U.N. and other international circumstances, while the U.S. will exert tremendous pressure on China and use the Iran issue to judge if China is a ‘responsible’ major power.” Meanwhile, Chinese Gold imports from Hong Kong have climbed to a record high due to investment demand. China bought nearly 103,000 kilos from Hong Kong in November alone.

WEEKLY SPOT PRICES

Gold: Spot Gold prices opened this week at $1,609.20. The high was on Thursday, Jan. 12th at $1,622.90, while the low for the week occurred on Monday, Jan. 9th, $1,605.70. Gold ended the week up $32.10 at $1,641.30. This week, the most popular Gold bullion products were 2011 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2011 1 oz. Gold Maple Leafs.

Silver: Spot Silver prices opened this week at $28.25. Silver reached a high of $30.68 on Thursday, Jan. 12th, while this week’s low for Silver occurred on Monday, Jan. 9th at $28.55. Silver ended the week up $0.86 at $29.81 The most popular Silver products on APMEX.com this week were 2011 Silver American Eagles, 2011 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Platinum: Spot Platinum prices opened this week at $1,428.40 and ended the week up $64.20 at $1,492.60. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Palladium: Spot Palladium prices opened this week at $616.80 and ended the week up $22.20 at $639.00. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

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Australian Gold Lunar Coins

Designed by the Perth Mint in Australia, the Australian Gold Lunar coins are among some of the most beautiful coins in the world. Centered around the Chinese lunar calendar, the Australian Gold Lunar coins appeal to collectors and investors all over the world. Created because of popular demand from international investors and the success of the Australian Gold Lunar Series I coins, the Australian Gold Lunar Series II began in 2008 with the Year of the Mouse coins and will end with the Year of the Pig coins in 2019.

Struck from .9999 fine gold, Australian Gold Lunar coins are a great way to acquire and invest in precious metals. Legal Australian tender, most Gold Lunar coins are struck with a larger diameter. Inspired by China’s ancient lunar calendar, the Australian Gold Lunar Series coins feature the 12 animals central to the calendar’s stories. According to the lunar calendar, each of these 12 animals has a profound influence over those born under its year of “rule.”

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11.18.11 Weekly Recap

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The U.S. debt passed the $15 trillion mark this week.  What does a trillion dollars look like?  A trillion is 1 million multiplied by 1 million. 1,000 billion dollar bills in your pocket amounts to $1 trillion which is understandably inconceivable to most people. Americans should be alarmed about this $15 trillion debt when we learn that the ratio of U.S. debt to its GDP is now 102% and rising.  When the debt-to-GDP ratio of a country hits 90%, it begins to become a drag on future economic growth.  If this ratio climbs to 100% or higher, the economic growth becomes nearly impossible.

It appears that until Europe is fixed, its headlines will continue to drive the markets for the foreseeable future Robert Pavlik, Banyan Partners chief market strategist, expressed,“We’re capped, at least until we can knock Europe off the front page.” Gold fell more than $50/oz on Thursday as concerns of expanded contagion from the euro zone crisis caused large selloff in almost every market. There is a lot of fear, warranted or not, over the exposure of U.S. banks to the debt crisis in Europe.  The concern is not over any of the countries we’ve worried about over the past few months; the concern is the exposure of U.S. banks to French and British debt.  The exposure to Greece, Ireland, Italy, Portugal and Spain totaled a relatively manageable $50 billion as of Sept. 30th; however, the exposure to French debt is approximately $188 billion and exposure to British debt is approximately $225 billion.

German Chancellor Angela Merkel said that Europe could be facing its toughest hour since WWII.  Greece and Italy both have new leaders but this does little to nothing in itself to solve the problem.  Both new leaders are rushing to form new administrations and coalitions to stave off the damage of escalating debt problems.  “Europe is in one of its toughest, perhaps the toughest, hour since World War II,” Merkel told her conservative party in Leipzig.  “If the euro fails, then Europe fails, and we want to prevent, and we will prevent, this.  This is what we are working for, because it is such a huge historical project,” Merkel said.  Investors continue to look for decisive action from euro zone leaders.

This time of year, hedge funds and other investment firms are required to make regulatory filings with the SEC to report their holdings.  These reports can give an indication as to the outlook of some of the world’s savviest investors.  It appears that many are cautiously optimistic but are still avoiding risk, mainly due to fears of a contagion from Europe’s financial woes.  Ryan Detrick, senior analyst at Schaeffer’s Investment Research, said, “We still think it makes sense to be cautiously bullish here.  Don’t go overboard, obviously, because those Europe concerns are clearly still relevant.”

In an interview on Wednesday, Christopher Waller, research director for the St. Louis Federal Reserve Bank, warned that economic recovery in the U.S. is likely to be a process that will take several years and that the Federal Reserve can do little to shorten it.  “Something’s happened in U.S. labor markets that we can’t overcome,” he said, adding, “No matter what we do, recovery is going to be slow.” Bullard has said the Fed shouldn’t engage in any additional easing of monetary policy unless the U.S. economy derails from its current modest growth, stating, “There’s no point in trying to say, ‘Cure cancer with monetary policy.’ It’s just not possible.”

Meanwhile, Chicago Fed President Charles Evans is pushing for a commitment from the Fed to do more to decrease the nation’s high unemployment rate.  Evans, who has been pushing for more aggressive action from the Fed for some time, said, “I just think this is the time to stretch the boundaries a little bit more and take a few chances.”  He is pushing for a plan that involves asset purchases (some form of quantitative easing (QE) as well as very low interest rates until the unemployment rate drops below 7% or until inflation rises above 3%.  At the most recent meeting of the Federal Open Market Committee, Evans was the lone dissenter on the panel who favored more aggressive action, including a third round of QE.  Now, two more Fed presidents have released statements supporting Evans’ ideas.  But if Evans gets his way, how will the stimulus be paid for?

WEEKLY SPOT PRICES

Gold:
Spot Gold prices opened this week at $1,778.40. The high was on Monday, Nov. 14th at $1,797.60, while the low for the week occurred on Thursday, Nov. 17th at $1,711.00. Gold ended the week down $50.40 at $1,728.00. This week, the most popular Gold bullion products were 2011 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2011 1 oz. Gold Maple Leafs.

Silver:
Spot Silver prices opened this week at $34.10. Silver reached a high of $34.92 on Monday, Nov. 14th, while this week’s low for Silver occurred on Friday, Nov. 18th at $30.93. Silver ended the week down $1.64 at $32.46. The most popular Silver products on APMEX.com this week were 2011 Silver American Eagles, 2011 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Platinum:
Spot Platinum prices opened this week at $1,646.40 and ended the week down $48.50 at $1,597.90. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Palladium:
Spot Palladium prices opened this week at $664.30 and ended the week down $57.80 at $606.50. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.com.

100 Corona Gold Coins & Gold 50 Pesos

For decades, these Gold coins have remained a world favorite for people interested in Gold investments because the premiums charged for these coins are normally lower than for most other Gold bullion coins. The 100 Corona coin contains 0.9802 oz. of 21.6-karat Gold. The Corona coins were originally issued from 1908-14, bearing the date of mintage; after the death of Austrian Emperor Franz Joseph, the coins were imprinted with the commemorative date of 1915. The Austro-Hungarian 100 Corona coin is no longer minted. The 50 Pesos coins were minted in Mexico City. The Peso coin contains 1.2057 oz. of 90% Gold and 10% copper that strengthens the coin to endure the wear of circulation.

Increase your Gold portfolio in thrifty fashion by adding Mexican Gold 50 Pesos bullion coins and Austro-Hungarian Gold 100 Corona coins to your holdings. While supplies last, buy Gold 50 Pesos and 100 Corona coins at only $24.99 per ounce over the Gold spot price at APMEX.com.

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The Fed’s “Dual Mandate”

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When congress passed the Federal Reserve Act in 1913, they established our nation’s independent central bank, and outlined the purpose of the bank.  Section 2A of the act sets this purpose:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

This section outlines what economists call the “dual mandate” of the Fed: a balance between price stability (i.e., inflationary control) and full employment.  When one is out of balance, the Fed will act to adjust monetary policy in order to restore the balance.  For example, in 2009, when the U.S. was experiencing the worst economic cycle in nearly a decade, unemployment hit nearly 10%.  The Federal Reserve used the policy tool known as Quantitative Easing to increase the money supply and lower interest rates, with the goal being for businesses to invest money in production and hire more workers.

The risk to this strategy is that the Fed may actually take a step too large for the economy to handle.  The U.S. economy has been compared to a large ship, and monetary policy is the steering wheel.  The ship turns very slowly and has a lot of momentum;  by the time you know you’ve turned the wheel too far, it can be too late to do anything about it.  There are many opinions as to how well the Fed Chairman Ben Bernanke is steering the ship. I would be curious to hear yours.

By Peter LaTona, Vice President of Sales at APMEX

Balance your portfolio with the 4th asset class of Gold today.

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