End of week Gold and Silver report

 

Gold waited all week for direction:

As the week started gold and other markets had all eyes on a small town in Wyoming called Jackson Hole. That is where an annual meeting is held by the U.S. Federal Reserve and in the past has given way to significant monetary action such as two rounds of easing. There was a lot of speculation and waiting for news. For some, it was not going to be an extraordinary event.  Many financial specialists believe the Jackson Hole meeting will not be the critical event that could trigger further government financial stimulus this time around. “The critical period is really from Friday to the 12th (of September) — the constitutional court decision,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vt. Many others shared a different view of the meetings of the Fed. While the question remains whether there will be another round of monetary easing, if the answer is “no,” it could affect Gold’s price. “We see near term risks of a reversal if Jackson Hole does not deliver what the market is hoping for,” said Nick Trevethan, senior metals strategist at ANZ in Singapore. Friday came and so did the report with Federal Reserve Chairman Ben Bernanke giving indications that the Fed will soon embark on another round of bond buying, otherwise known as quantitative easing (QE). “It is important to achieve further progress, particularly in the labor market,” Bernanke said. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” Bernanke cited previous rounds of easing as effective in stimulating economic development and job creation without hastening inflation.

Europe still trying to work through issues:

Europe clearly took a backseat this week to the Fed’s potential monetary easing announcement, but the European Central Bank (ECB) is readying for an ECB Governing Council meeting next week. James Reid of Deutsche Bank said, “For now, Europe is in a holding pattern ahead of clarity surrounding the next move in the great ECB bond buying maneuverings, and the U.S. is in limbo ahead of Bernanke’s Jackson Hole appearance tomorrow. For the latter, speculation mounts that Bernanke won’t say anything overly new in his speech.” The eurozone is in a battle of its own, regardless of what the Fed decides. Spain is being sucked into the center of the eurozone debt crisis. Spanish consumers have pulled as much as 5 percent of their private sector deposits. The other side of this coin is that Greek banks are seeing a boost in their deposits since June elections. Private sector deposits are up about 2 percent. The World Gold Council is suggesting a creative way of looking at Gold in the eurozone. Many pundits have suggested that troubled eurozone countries sell Gold to take care of their debts. This ill advised idea sounds like a simple resolution, but of course it is more complicated than that. The World Gold Council has suggested bonds and loans backed by Gold. Some groups (LCH.Clearnet, Intercontinental Exchange, and the Chicago Mercantile Exchange) have begun accepting Gold as collateral for margin requirements recently. Gillian Tett of Financial Times wrote that this “suggest(s) that a slow evolution of attitudes is under way — not so much in terms of the desirability of Gold per se, but the increasing undesirability and riskiness of other supposedly ‘safe’ assets, such as government bonds.”

United States economy still giving mixed reports:

In the U.S.A., a trend of economic growth could be a reason the announcement of another round of easing by the Federal Reserve was not made today. One discussion is surrounding the small amount of growth and whether it is enough to sustain a positive direction moving forward. The United States’ gross domestic product (GDP) went up in the second quarter by 1.7 percent, which was 0.2 percent more than a previous estimate. The GDP is seen as a key indicator of the economy. While there was improvement, many believe it was at a level low enough to warrant more action by the Fed. The release of the weekly jobless claims report has had little effect on Gold and Silver. The four week moving average of new claims rose by 1,500, while the week to week change was flat. Personal consumer spending increased in July to a five month high, according to data from the Commerce Department. Falling gasoline prices coupled with moderate increases in income to provide consumers a bit more to spend this midsummer. Despite July’s increase, consumers have been cautious on spending for most of the year, with a decrease in June and a flat report in May. “In the first quarter of the year, Americans saved less in order to spend more,” said Chris Christopher, senior economist at IHS Global Insight. “In the second quarter, job prospects were not very promising, so Americans put more money aside and spent less.”

 

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Fed chairman gives clear signal for QE3

English: President Barack Obama confers with F...

English: President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia)

The much anticipated Jackson Hole, Wyo., speech took place this morning, with Federal Reserve Chairman Ben Bernanke giving indications that the Fed will soon embark on another round of bond buying, otherwise known as quantitative easing (QE). “It is important to achieve further progress, particularly in the labor market,” Bernanke said. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” Bernanke cited previous rounds of easing as effective in stimulating economic development and job creation without hastening inflation.

The Gold price has had a turbulent morning. The metal fell immediately after Bernanke’s speech but quickly rebounded, leaving Gold at its highest level since April. “The main catalyst for the reversal in Gold has been that Bernanke used the words “grave concern” and the interpretation is that there’s going to be more QE if he’s using such dire projection for the economy,” said Jeffrey Sica, chief investment officer of SICA Wealth Management. Today’s rise in Gold price could be the first substantial gain in a rally that some analysts predict to breach $1,900 by year’s end.

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, 1,681.20, Up $25.60.
  • Silver, $31.23, Up $0.88.
  • Platinum, $1,535.30, Up $30.60.
  • Palladium, $627.90, Up $11.40.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EDT)! Or call us Fridays until 6 p.m. (EDT)! If you have any questions about investing in Precious Metals or simply would prefer to place your order by telephone, we are here to help.

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Anticipation for Friday grows, affects the markets

 

The dominant news of the week will be speculation as to what will or won’t be announced during the annual Jackson Hole symposium.  Anticipation leading up to those announcements left stocks flat.  David Morrison, senior market strategist at GFT Markets in London, said “There are hopes that the Fed chairman will signal that another round of quantitative easing (QE) is imminent, although it seems more likely that he will keep investors guessing, while assuring them that the Federal Reserve stands ready to intervene further, if required.”

 

The eurozone is in a battle of its own, regardless of what Bernanke says at Jackson Hole.  Spain is being sucked into the center of the eurozone debt crisis.  Spanish consumers have pulled as much as 5 percent of their private sector deposits.  The other side of this coin is that Greek banks are seeing a boost in their deposits since their June elections.  Private sector deposits are up about 2 percent.

 

Official portrait of Federal Reserve Chairman ...

Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)

 

Gold is riding a three month increase in price, up 3.1 percent.  This is the highest percentage increase since January.  The rising prices are fueled, in part, by expectations for what will come from the Jackson Hole meeting.  Gold’s meteoric rise in price, doubling since 2008, has been fueled by the Fed’s QE tactics.  For those that are risk adverse, gold holds a strong appeal; as currencies inflate, gold will always be a store of wealth as its value is historically independent of any one currency.

 

At 9 a.m. (EDT), the APMEX Precious Metals prices were:

 

  • Gold, $1,665.40, Down $8.70.
  • Silver, $30.90, Down $0.24.
  • Platinum, $1,524.50, Down $29.70.
  • Palladium, $640.40, Down $15.80.

 

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Bernanke, LIBOR and lack of positive economic indicators

BEN BERNANAKE’S TESTIMONY BEFORE CONGRESS

Chairman of the Federal Reserve Ben Bernanke testified before congress this week.  Feedback from some in Congress to Bernanke’s testimony was that the Federal Reserve is the best hope for economic stimulus. “Given the political realities, particularly in this election year, I’m afraid the Fed’s the only game in town,” said Sen. Charles Schumer (D-NY). “I would urge you to take whatever actions you think would be most helpful in supporting a stronger economic recovery.”  However, Bernanke himself urged Congress to handle the looming “fiscal cliff” and avoid the brinksmanship that brought the nation to a standstill during last year’s battle over the debt ceiling. Bernanke took Congress to task over their collective inaction, saying, “The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long run sustainability and the fragility of the recovery.”

NOT MANY POSITIVE ECONOMIC INDICATORS THIS WEEK

It’s tough to find good news about the economy these days. Many economists say the American economy is poised for an anemic second half of the year. “We’ll have very slow growth,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. “The excess supply of homes will weigh on housing for quite some time. Manufacturing is starting to suffer a bit. The labor market remains pretty soggy.” According to a Bloomberg survey, Americans are more pessimistic than any time in the past six months. “A soft labor market and political tensions surrounding potential changes in tax policy are weighing on consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP.  American retail sales fell for the third straight month in June, further eroding confidence in a fragile economic recovery. Analysts expected retail sales to rise by 0.2 percent, but data released Monday morning by the Commerce Department show spending slipped by 0.5 percent.  Along with the disappointing retail data, the National Association of Realtors reported today that sales of previously occupied homes fell to the lowest point since October.

LIBOR MANIPULATION SCANDAL RAISES MORE QUESTIONS ABOUT ETHICS AT BANKS

Big banks doing bad things are again in the news. The Justice Department is investigating potential criminal charges against big banks and individuals for manipulating key global interest rates. LIBOR is the London interbank rate that is set by a small and select group of major banks. Barclays Bank already has been fined $450 million for fixing LIBOR. Other banks being investigated include Citigroup, JP Morgan Chase, the Royal Bank of Scotland and Deutsche Bank AG. Another question is whether regulators knew about the situation but turned a blind eye.

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Fed Chairman Leaves Markets Guessing

Precious Metals have rebounded from early session declines, as Federal Reserve Chairman Ben Bernanke’s testimony again did little to indicate when or what actions the Fed might take to simulate the economy. In short, he simply restated the Fed’s pledge to to act if needed. “The Gold market’s reaction is suggesting that we are not going to get any stimulus anytime soon until the economy deteriorates much further,” said Phillip Streible at futures brokerage R.J. O’Brien. “I think these markets are going to be in a trading range for a while,” he said.

Feedback from some in Congress to Bernanke’s testimony was that the Federal Reserve is the best hope for economic stimulus. “Given the political realities, particularly in this election year, I’m afraid the Fed’s the only game in town,” said Sen. Charles Schumer (D-NY). “I would urge you to take whatever actions you think would be most helpful in supporting a stronger economic recovery.”

The man who runs the world’s largest mutual fund feels the United States is indeed nearing a recession and expects the Federal Reserve to take more steps to help economic growth. The United States is “approaching recession when measured by employment, retail sales, investment, and corporate profits,” said Bill Gross, who manages the $263 billion Pimco Total Return Fund.

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,589.90, Down $3.20.
  • Silver, $27.38, Down $0.03.
  • Platinum, $1,420.00, Up $2.70.
  • Palladium, $585.10, Up $6.30.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EDT)! Or call us Fridays until 6 p.m. (EDT)! If you have any questions about investing in Precious Metals or simply would prefer to place your order by telephone, we are here to help.

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