Whether it is the effects of the QE3 announcement wearing off or investor’s taking profits off the table, gold and silver prices have been moving down throughout the morning. There was news coming out this weekend from the International Monetary Fund (IMF) meeting in Tokyo. Federal Reserve Chairman Ben Bernanke found himself defending QE3. International criticism is centered on currency valuations. The International community feels that Federal Reserve actions are artificially boosting their currencies, which puts them at a disadvantage for exporting their goods and services. This dialog brings into play a reoccurring theme that global currencies are in a race to the bottom.
Regarding the above mentioned race to the bottom, IMF Managing Director Christine Lagarde is urging Europe to roll out a bailout. The European bailout would look much like the US QE3. The European Central bank is being urged to aggressively begin buying bonds to lower the borrowing costs of the respective nation. Such measures will pump more euros into the marketplace and most likely will continue to depress the valuation of the euro. IMF’s Lagarde is also requesting that Greece be given more time to get their financial house in order.
U.S. retail sales rose more than expected in September as U.S. consumers spent more on gas and cars. The core retail sales (which do not include cars & gas) rose 0.9%. Analysts had expected a gain of 0.3%. This indicates that consumer sales from July- September were stronger than expected. The New York Federal reserve “Empire State” report was not as positive. This report is seen as a gauge of general business conditions. It did rise from a minus 10.41 to a minus 6.16, but economists were expecting minus 4.55.
At 9AM EDT the APMEX precious metal prices were:
- Gold price –$1,744.00 – down $15.20
- Silver price – $33.16 – down 51 cents
- Platinum price – $1,641.30 – down $15.00
- Palladium price – $639.00 – down $1.00
Gold showed mixed results this week:
This week has been active to say the least in the gold market pricing. While the market is still riding the high of monetary easing around the globe, there have been a few bumps in the road during the week. The prices are still being supported by easing monetary policy and lingering eurozone troubles. Chicago Fed President Charles Evans “was extremely dovish” about the third round of quantitative easing in the U.S., according to RJO Futures’ Phillip Streible. “He was full-throttle on QE.” The Gold price neared an 11 month high this week, supported by an overall lackluster feeling from investors regarding the global economy. Gains increased after the release of the ADP jobs report, which, including reductions in previous months’ estimates showed a net increase of 133,000 jobs, well below expectations of 153,000. Federal Reserve officials have recently announced that until jobs numbers improve, QE3 will continue. Tom Kendall of Credit Suisse said, “We’ve seen intra-day moves triggered by the ADP numbers before, so it wouldn’t be a surprise if there was a bit of intra-day volatility around that number. To get this market over $1,800 and trending higher again, what we need to see is greater participation in places like India on the buy-side.” Despite Friday’s dip in market price due to the U.S. jobs report, strategists at Deutsche Bank expect fiscal fears, spurred on by recent quantitative easing and expectations of a U.S. credit downgrade, which will increase in the fourth quarter. “This will prove to be most beneficial to the Precious Metals complex and specifically gold,” the strategists wrote in a research report.
Global economic issues continue to make headlines:
Economic struggles have been taking a toll on markets around the world. It shows that the global marketplace is very much intertwined between countries. The European issues have been a main topic of conversation and this week Spain was back in the spotlight. There is some thought the Spanish government will soon request a bailout, which some consider a necessary step to alleviate the eurozone’s debt crisis. Paul Mendelsohn, chief investment strategist at Windham Financial services in Charlotte, Vermont said, “I think the market feels that we are closer to some type of action and resolution in terms of the Spanish problem, (and) that’s certainly helping markets this morning.” While some have predicted an end to the Euro, they are not willing to buy into that notion. An boost came with news that the European Central Bank would hold steady on interest rates again, at 0.75 percent, with a zero percent interest rate on its deposit facility. ECB President Mario Draghi said at his monthly press conference that the eurozone’s recent bond buying plan has eased regional tensions. He also repeated earlier statements that the euro is “irreversible.” The reassurance that fiscal assistance will persist has once again bolstered the Gold price, which is close to breaching the $1,800 mark. “Indications from Mario Draghi [...] that the European version of quantitative easing will go on as planned no matter what happens in the U.S.” provided support for Gold prices, said Brien Lundin, editor of Gold Newsletter.
The United States Federal Reserve keeps easing opened and other U.S. news:
Federal Reserve Chairman Ben Bernanke spoke at the Economic Club of Indiana this week, stating the Fed’s objectives of price stability and maximum sustainable employment have not changed. Bernanke said, “These goals mean, basically, that we would like to see as many Americans as possible who want jobs to have jobs, and that we aim to keep the rate of increase in consumer prices low and stable.” During the United States’ recession of 2007-09, the Fed lowered borrowing costs to almost nothing and purchased $2.3 trillion in mortgage and Treasury securities to create and sustain growth. Not everyone has been on board with the Fed’s decisions to lower interest rates or to create further easing but Bernanke believes the measures will boost the economy. The national debt in the United States has been the topic of discussion for years, and now that it is an election year those talks are magnified. The situation is clear when you look at the numbers. The national debt is more than $16 trillion and the gross domestic product (GDP) is approximately 11 percent less than that. That gap between the debt and the GDP is very alarming to most economists. Pimco’s Bill Gross said Tuesday, “Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive.” The other major news of the week was the unemployment report. The addition of jobs in September was disappointing, but the unemployment rate fell by 0.3 percent to 7.8 percent, which is the lowest level since January 2009. Since the newest round of quantitative easing by the Fed is expected to continue until jobs numbers improve, reports such as this one will carry more weight than they may have previously.
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Gold & silver prices are holding on to recent gains in early morning trading. Last week, gold and silver was up for the 4th week in a row. Gold prices have risen 13.2%, so far in 2012. According to Peter Fertig, a consultant for Quantitative Commodity Research, “if we do not see $1800 this week, that would not be a problem as, nevertheless, the signs are that precious metals are moving higher ECB Rally Sputters as Leaders Fail to Act on Spain, Greece — Business News – CNBC.”
Stocks in the European market are falling today, as once again their leaders fail to act on Greece or Spain. Markets had received a boost on the European Central Bank’s bond buying announcement, as well as the Federal Reserve QE3 announcement last week. Investors are frustrated because it would appear that instead of taking advantage of this “breathing space”, European finance ministers are in even less of a hurry to tackle critical issues. These policy makers decided to wait on three urgent issues: a bailout for Spain, a decision on Greece’s request for a two-year extension on bailout terms, and a common supervisor for European banks.
At 9AM EDT the APMEX precious metal prices were:
- Gold price – $1,771.70 – up 10 cents
- Silver price – $34.63 – down 4 cents
- Platinum price – $1,698.80 – down $15.90
- Palladium price – $692.70 – down $6.60