The morning news is optimistic for the economy based on renewed growth figures from Europe. The see-saw effect of Europe’s ups and downs are reversing yesterdays drop and once again going up. Tuesday data is showing gross domestic product output for the region in line with expectations; Germany had modest growth while France had a flat performance.
Closer to home news is also positive as a report is out today showing that retail sales rose 0.8 percent last month. Economists had only expected a 0.3 percent rise. The report also tells us that the seasonally adjusted Producer Price Index is up 0.3 percent last month, higher by 0.1 percent than expected. Despite the higher prices, there was an increase in consumer spending during July. The core measure of retail sales which excludes autos, gasoline, and building materials rose a solid 0.9 percent.
One of the top consumers of gold in the world, India, is showing weak demand for the precious metal as prices for gold remain strong against their currency, the rupee. India’s festival season has begun and will peak in November. This is a time for weddings and giving gold as a gift.
At 9 a.m. (EDT), the APMEX Precious Metals prices were:
- Gold, $1,597.70, Down $13.50.
- Silver, $27.75, Down $0.13.
- Platinum, $1,402.00, Up $8.20.
- Palladium, $576.70, Down $0.50.
CENTRAL BANK REACTIONS KEY TO SURVIVING
The euro rebounded in afternoon trading today, which helped Gold, Silver, and many stocks to rebound from early losses, as well. China is now firmly in the mix as one of the global problems, said Sandy Lincoln of BMO Asset Management U.S. “It’s Europe, China, and the U.S. as the three big worries,” Lincoln said. How central banks react in this trying time is key to whether the global economy essentially makes it through to the other side. Miller Tabak’s Peter Boockvar said, “We’ve been talking about the tug of war for a while of the slowing global economy on the one hand, and central bankers trying to fight it tooth and nail on the other hand.”
Recent data from China, as mentioned previously, may be the jolt that central banks needed to spur them into more action for the economy. Jeffrey Sica of SICA Wealth Management said, “Gold is up mainly because of the weak manufacturing numbers in China, suggesting that there is a pretty strong indication we are going to see more quantitative easing there.” One potential setback to more easing is rising food prices, however. Sica believes that the Federal Reserve will be more concerned with keeping inflation in tow due to these rising prices.
At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1,621.00, Up $2.30.
- Silver, $28.19, Down $0.02.
- Platinum, $1,402.70, Down $11.10.
- Palladium, $584.30, Down $4.00.
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U.S. stock futures and Precious Metals are down slightly this morning, as investors are taking profits on the recent gains. News of a downgrade to the outlook for Greece’s sovereign debt rating also affected the markets, as the EU and International Monetary Fund seem less likely to provide more bailout funds to the troubled country. Also, the Bank of England paved the way for another round of quantitative easing for its country, cutting growth and inflation forecasts.
At least one analyst believes that the recent market rally is actually just setting up the stock market to fall. “I think we’re in choppy waters and that continues,” Charlie Morris of HSBC Global Asset Management said. “You need to trip the market to have a proper collapse. So you almost need to set it up with a rally, get everyone excited and then it can fall. If there are risks, the risks to a very negative market come after this rally fades.” In the long-term, traditionally, steep stock market losses are supportive of the Gold price.
The main topic supporting the price of Precious Metals right now is still the possibility of future monetary easing by the U.S. and the eurozone. Richcomm Global Services senior analyst Pradeep Unni said, “Gold seems to be supported by hopes that Europe and the United States would launch more stimulus measures to help shore up their faltering economies. Investors are betting that the festering debt crisis in the eurozone could push the ECB to launch a new round of bond-buying soon.”
At 9 a.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1,608.40, Down $2.40.
- Silver, $27.90, Down $0.30.
- Platinum, $1,403.70, Down $7.70.
- Palladium, $586.50, Down $3.20.
Precious metals have deflated since Bernanke’s testimony earlier this week, but remain poised for the first overall weekly increase in about a month. Physical demand of gold is still hurt by India’s currency issues and a weakening ETF market as well. Analyst David Wilson’s remarked, “Given the collapse of the rupee, gold prices in India are still close to record highs, which is killing the jewelry market at the moment… Physical investor demand, when you look at ETFs, is not positive, so you would need speculative demand to be making up the difference, and it’s not. That’s related to the issue of growing skepticism over whether there will be U.S. QE.”
Meanwhile a Spanish bank bailout has been agreed to pending the actual bank audit to see just how bad the property loan situation actually is. Luxembourg’s finance minister Luc Frieden said, “We have formalized what we discussed in the past two Eurogroup meetings. We have formally approved the memorandum that lays out the conditions under which Spain can be lent money for the recapitalization of its banks… The approval of all 17 ministers is there, and that means that the program can continue. Money will not flow immediately, because work on the analysis of the specific banks is ongoing.” The audit is expected to be completed by mid-September.
Meanwhile concerns continue to mount over the correct response to the escalating violence in Syria following Russia and China’s veto of the U.N.’s proposal. The rumors swirling President Assad has agreed to give up power are being shot down. The clamor for military assistance is not there the same way it was in Libya either. The overall feeling is that “the regime is going through its last days,” according to rebel leaders.
At 9:00 a.m. (EDT) – the APMEX Precious Metals spot prices were:
- Gold – $1,578.80 – Down $3.20.
- Silver – $26.98 – Down $0.33.
- Platinum – $1,411.40 – Down $11.70.
- Palladium – $578.40 – Down $7.50.
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Precious Metals prices were on the rise following losses Thursday. Precious Metals prices have been following the global economic situation and the movement of the American dollar. There is speculation that Silver is undervalued at current levels and about what actually is driving the price. Julian Phillips at silverforecaster.com said, “With the monetary stresses now and for the next few years at current levels, there is little reason why prices should fall. Gold will react more and more as a monetary metal, and the Silver prices will move with it, not with economic conditions.”
Crude oil and Gold prices began to climb this morning after European Union leaders announced a strategy to have a single financial director for the region. The European Central Bank will step into this supervisory role for banks in the eurozone. This approach should help calm the markets. In some bearish news affecting crude oil, Saudi Arabia is planning to resume an oil pipeline project that has been on hold for a reported two decades, which should relieve some concerns involving the Strait of Hormuz.
United States consumer sentiment for June fell to its lowest level since December. Americans’ attitude toward the economy isn’t necessarily optimistic now, especially from the viewpoint of those in households with incomes of more than $75,000. Richard Curtin, a survey director, said, “Since these households account for a large share of total spending, if the declines continue in the months ahead, it could have a substantial impact on total spending.”
At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1,599.10, Up $47.50.
- Silver, $27.57, Up $1.22.
- Platinum, $1,441.30, Up $53.50.
- Palladium, $586.50, Up $21.60.