Prediction on QE3 Roll out; S&P Foresees Greece Exiting Eurozone

Today, gold followed the trends of the euro and oil as all three assets clearly began to strengthen.  The safe haven appeal continues to coincide with gold as Jeffrey Sica, at SICA Wealth Management LLC suggested the yellow metal is an essential tool to deal with the global economic worries.  Sica said, “Right now the tools to deal with the European crisis and the U.S. economy are limited and questionable.  So that puts the financial market in a very vulnerable position and enhances the desire to accumulate safe-haven-type investments” such as gold.

Dennis Gartman, the editor and publisher of The Gartman Letter, spoke to CNBC today about the likeliness of the Federal Reserve announcing the next round of quantitative easing (also known as QE3) as early as this month.  Gartman bases his predictions on the latest jobs report that was released Friday with disappointing numbers.  Gartman said, “The Fed has made it abundantly clear that it has kept QE3 up on the table; (it) would be executed if economic circumstances deteriorated.  And you have to admit that Friday’s number — no matter how you try to slice it — was deterioration.”  Gartman also mentioned QE3 will happen far ahead of the U.S.A. presidential election in November so that it is not linked in any political manner to the current administration.

Standard & Poor’s (S&P), one of the big three credit rating agencies, has announced it foresees a one in three chance that Greece will exit the eurozone in the coming months. “ A rejection by Greek voters to enact financial reforms demanded by the European Commission, International Monetary Fund, and European Central Bank would likely result in a cutoff of international aid and subsequent defaults,” S&P said.

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

  • Gold – $1,619.90 – Down $1.70.
  • Silver – $28.30 – Down $0.30.
  • Platinum – $1,430.70 – Down $4.50.
  • Palladium – $612.90 – Down $1.10.
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Friday’s Jobs Report Could Spur the Fed to More Quantitative Easing

The Federal Reserve Committee has never taken QE3 off the table. The possibility of additional quantitative easing has remained an option should the circumstances warrant it. Many analysts see the dismal jobs report on Friday as just the sort of circumstances that will trigger the next round of easing. Not only was the 69,000 new jobs added very disappointing, but it was all the more lackluster considering the numbers from prior two months were lowered. Dennis Gartman speaking on CNBC this morning said there is a 100% chance of further Fed easing. Frank Lesh, broker and futures analyst with FuturePath Trading said, “Now that it appears the U.S. may have to act with Europe. That just means throwing more money at it. That’s just what gold wanted to hear.”

The call for central banks to take action is not just here in the U.S., but is being heard worldwide. Bond yields have declined and the global stock markets continue to go down. John Noonan, Senior Foreign Exchange Analyst with Thomas Reuters said, “Synchronized monetary easing could happen as early as even this week, as central banks of Australia, England and Europe meet.” According to Michael Gayed, Chief Investment Strategist at Pension Partners, this could be a do or die moment for central banks. U.S. bond yields out at their lowest levels since post-Lehman days, which is a sign the market is expecting QE3 from the Federal Reserve.

Gold is holding on to Friday’s gains in early morning trading. Friday was the biggest one day advance since last August on investor risk aversion and the greater expectations for worldwide monetary easing.

At 9AM EST the APMEX precious metal prices were:

  • Gold price -$1,620.70 down 90 cents
  • Silver price – $28.41 – down 19 cents
  • Platinum price – $1,438.80 up $3.60
  • Palladium price – $612.20 down $1.80
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Euro news dominates headlines; American stock futures and Precious Metals are trading lower


Spain (Photo credit: robynejay)

American stock futures and Precious Metals are trading lower this morning amid another credit-rating downgrade in Spain.  Borrowing costs in the country soared, and it has now become a matter of when, not if, a bailout will be necessary.  Reports are also showing that the European Central Bank has rejected Spain’s plans to recapitalize Bankia SA, its largest bank, which put a dagger in sentiment.  This news drove the American dollar up, while precious metals have been pushed down.

A quick look at the headlines of CNBC’s website confirms that most of the focus is on the eurozone.  One headline is particularly interesting, with an analyst suggesting that Spain would exit the eurozone before Greece did.  Spain, the eurozone’s third-largest economy, leaving the euro may not be the country’s choice, but instead may be the EU’s.  “They are too big to rescue, they have no political hang-ups about rupturing their relations with the EU, they are already fed up with austerity, and there is a bigger Spanish-speaking world for them to grow into,” Matthew Lynn of Strategy Economics said.

Many investors are fearing that China could be slipping into a similar situation to that of 2008-2009, but top advisers said that “massive fiscal stimulus” is not the answer at this time.  Richard Boucher of the Organization for Economic Co-operation and Development said, “I don’t think we’re back in that kind of acute crisis phase…  It is not just a question of money.  The Chinese authorities have a whole variety of tools to use to stabilize the right level of growth… I think signs that Chinese growth is stabilizing at a steadier level, a more sustainable level, would be good for everybody.”

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

  • Gold – $1,549.60 – Down $0.90.
  • Silver – $27.76 – Down $0.12.
  • Platinum – $1,413.30 – Down $16.80.
  • Palladium – $602.50 – Down $3.50.
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Wealth manager supports Gold in portfolios

Fluctuations in the Gold price the past two weeks have made investors reluctant to buy the metal. However, Michael Yoshikami, founder and chairman with Destination Wealth Management, spoke with CNBC regarding reasons why Gold should be included in one’s portfolio. Yoshikami takes into account how central banks have most recently become net buyers of Gold to protect themselves and diversify out of unstable currencies. Yoshikami said when inflation materializes, Gold will provide a level of inflation protection, because tangible assets tend to perform well in inflationary environments.

Consumer sentiment in the United States rose to its highest point in more than four years in May. Optimism in the air as a healthier economy is beginning to develop. Richard Curtin, head of the University of Michigan’s consumer survey, reflected on how long the consumer sentiment will remain positive. He said, “The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made.”

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

  • Gold, $1,567.60, Up $8.30.
  • Silver, $28.35, Up $0.10
  • Platinum, $1,427.20, Up $2.80.
  • Palladium, $592.00, Up $2.40.
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Metals Retreat as Dollar Continues to Climb

Currency markets pushed the American dollar higher amid dim hopes for a European solution. Kevin Hebner, a foreign-exchange strategist for JPMorgan in London, wrote to clients today, “For the second time in six months, Greece’s Economic and Monetary Union exit seems imminent.”  Fears of a breakup of the eurozone have been driving down the value of the European currency for the last few weeks.  A weak euro bolsters the American dollar, and as a consequence, typically pushes down the price of precious metals and other commodities.

A bit of positive news surrounding the American housing market was released today, indicating an increase in sales of existing homes.  “We’re still a ways from looking at an encouraging picture of the U.S. economy, though when it comes to housing, every little bit helps,” said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.  Overall home values have increased 10.1% from April 2011, but are still about 30% lower than the high-water mark set in 2006.  Diana Olick, a real estate reporter for CNBC cites a reduction in bank foreclosures and distressed sales as the primary driver for the higher prices.

At 4 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,569.10, Down $21.10.
  • Silver, $28.25, Up $0.17.
  • Platinum, $1,448.80, Down $14.70.
  • Palladium, $613.00, Up $0.30.
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