America waits for further stimulus; how are investors measuring the euro

 

Gold fell slightly today with investors taking their earnings after last week’s gains, which was encouraged on the assumption that central banks will provide additional stimulus actions.  “Everybody seems to be waiting for this huge money printing that they think is going to happen which hasn’t happened yet. So, nobody really wants to bet against it, but at the same time they don’t want to go long,” said Doug Roberts, chief investment strategist at Channel Capital Research.

As the European debt crisis continues, it is evident that Europe’s foundation is ultimately taking care of the peripheral countries that have more or less had to be bailed out by the troika of the European Central Bank, International Monetary Fund and European Commission.  The concerns are beginning to rise as the growth numbers for France and Germany are slipping.  Also, for the months of May and June, Germany’s factory orders fell by a disturbing 1.7 percent compared to the forecasted 0.8 percent.  Gerard Lyons, chief economist at Standard Chartered, told CNBC.com. “In the good times, the euro encourages money to go from the core to the periphery, creating booms and busts. In the bad times, it encourages money to go the other way and increases the liabilities of the core.  The euro is a fundamentally flawed concept, and that’s why the core is facing greater challenges. The core can’t cut themselves off completely from the periphery and that’s what markets are responding to.”

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,610.60, Down $10.70.
  • Silver, $27.87, Down $0.31.
  • Platinum, $1,388.50, Down $12.40.
  • Palladium, $574.50, Down $9.20.

 

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Gold rallies strongly today

Gold, much like American stocks, rallied strongly today, though it wasn’t enough to claim a victory on the quarter.  The move upwards in Gold is thanks to expectations regarding Europe’s plan to curb its debt crisis being inflationary.  Historically, any type of monetary easing or money printing has been very supportive of Gold, as is any time of economic turmoil.  The news brought the euro up against the dollar, and Gold followed.

Part of the deal in Europe revolves around the European Financial Stability Facility being able to “provide support to banks directly, without going via national governments balance sheets,” according to Jens Larson of RBC in London.  Larson added, “That suggests that Spain’s public finances may eventually be freed of some of the burden associated with recapitalizing its financial system, and the statement also makes clear that a new deal for Ireland might be in the making.”  However, there is still concern that this won’t be a lasting solution, or at least that this news can continue to carry a market rally.

What the American dollar will do after the coming election has surprisingly nothing to do with the outcome of the election itself.  Historically, global and domestic economies have more of an impact on currency trade than political issues.  Currency trade has been a big factor in Precious Metals prices lately, with Gold and Silver moving inversely to the dollar.  While Europe’s financial crisis has caused the dollar to shine just by mere comparison, that isn’t likely to continue.  Axel Merk, portfolio manager of the Merk Hard Currency Fund said, “The dollar is benefitting from the mess in the eurozone, but things are not much better here.”

At 5:07 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold – $1,600.10 – Up $48.20.
  • Silver – $27.53 – Up $1.18.
  • Platinum – $1,448.50 – Up $60.70.
  • Palladium – $583.20 – Up $18.30.
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