Weekly Gold and Silver Market Recap for Oct 5, 2012

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.

Gold & Silver Prices are Holding at 7 Month Highs

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

Weekly Recap: The Fed Pulls The Trigger On Stimulus Plan

The Fed Pulls The Trigger On Stimulus Plan:

Precious Metals prices spiked Thursday after the announcement that a third round of quantitative easing (QE3) would start on Friday. In a statement, the Federal Open Market Committee said, “The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.” Of course, among the current conditions the Committee mentioned is a very stubborn 8 percent unemployment rate.  For QE3, the Fed will purchase mortgage-backed securities to the tune of $40 billion per month and monitor the results. This will be an “open-ended” bond-buying plan, so the end of the program will be decided at a later date when conditions improve.  News of this new program sent Gold up Thursday, closing up nearly 2 percent for the day and 10 percent for the month. “After the move we had, not just yesterday, but over the last two or three weeks, I think it would be natural to look for a period of consolidation,” said Tom Kendall, an analyst at Credit Suisse in London. “But certainly going into the back end of this year, I would be looking for Gold to be getting towards at least the $1,850 level.”

Platinum Climbs As Strikes Continue:

The Platinum prices gained at a much greater pace than other metals this week due to the unrest in South Africa. The top Platinum producer in the world, Anglo American Platinum, is now being affected by striking miners, who blockaded roads leading to shafts. “Fear of intimidation and threats by unidentified individuals in and around” certain locations caused some non-striking miners to be unable to report for work, according to a statement.  Reports were released that 10,000 striking platinum miners – many of whom were armed with sticks and machetes – marched on several Lonmin mine shafts threatening violence against strike breakers who are continuing to work. The recent strikes have inspired laborers in South African gold mines to rebel against their own employers. The result has been a stoppage of production at two Gold Fields (the world’s fourth largest gold producer) mines in the last several days. “We haven’t been given any demands but the pattern is the same as KDC East. It is intimidation. The strikers went around from hostel to hostel yesterday to prevent the others going to work,” Gold Fields spokesman Sven Lunsche said.

Concerns Over U.S. Debt Levels Climb:

German Finance Minister Wolfgang Schaeuble brought into question the United States’ high level of debt. He said in a speech this week to the lower house of parliament that U.S. debt is a burden for the global economy. He underscores the fact that the rest of the world is keeping their eye on the U.S. elections and is concerned about our ability to deal with our mounting debt once the elections are over. This comes just after the United States national debt reached an inauspicious $16 trillion. Credit rating agency Moody’s also warned this week that the U.S. may lose its Aaa credit rating if next year’s budget policies do not show a pattern of reducing the national debt over time. If budget talks “lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable,” Moody’s said in an emailed statement. “If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.” Last year rival Standard & Poor’s downgraded the U.S. credit from its top rating.

US Economy Looking Dim; Gas Prices Down

The price of gold is moving up as the safe haven appeal fully returns with the continued weariness of the eurozone debt crisis worsening.  Cyprus is the fifth eurozone country to ask for assistance from Europe.  The Cypriot government said in a statement, “The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spillover effects through its financial sector, due to its large exposure to the Greek economy.”

Goldman Sachs strategist Jim O’Neil is more concerned with the U.S.A. economy than Europe’s due to America’s fragile condition that seems to be off track.  O’Neil said, “Europe doesn’t run the world.  The second half of the year, unless Europe completely implodes, I’m still in the camp that the markets recover, particularly the U.S. and some of the big (emerging markets) and we could still conceivably see new highs,” he said. “So we shouldn’t get solely focused on the European stuff.”

Gas prices are slowly falling, which in turn is positive for the economy to an extent.  Credit Suisse economist Jonathan Basile  said, “It’s like a stabilizer in the economy, but you also don’t want to see gasoline prices falling persistently because that will tell you there’s got to be something else fundamentally wrong in the global picture.  Gasoline prices are the most visible prices in the economy. People see it…It’s very easy to see lower prices. That’s the good news. But you have to put it into the context of what’s going on.”

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

  • Gold, $1,585.30, Up $17.90.
  • Silver, $27.57, Up $0.80.
  • Platinum, $1,444.50, Up $11.30.
  • Palladium, $608.40, Up $0.20.

Gold retains investor confidence

The markets for Gold and other commodities are going strong thanks to more economic issues in the United States and Europe. While the price of Gold has been steady, the stock market has been anything but. Menachem Brenner, a finance professor at New York University’s Stern School of Business, said, “People have lost confidence in nearly every other instrument, so they invest in Gold. Over the past 10 years, commodities have become a new asset class if you want to diversify beyond stocks. More institutional investors are coming in. This will be going on for years to come.”

Germany is going to be a major factor in the way Europe handles the financial crisis it faces. How the Germans factor into the equation will be a hot topic at the European Union summit on Thursday. The focus will be on which nations will lead the recovery efforts. However German Chancellor Angela Merkel says the focus needs to be more long term. “I say quite openly, when I think of the summit on Thursday, I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”

In the United States, the November elections are on the minds of Americans. The question may not be who will be elected, but what he will do once elected. In a recent poll, the answer to who will do the best job with the economy was “none of the above.” An Associated Press poll conducted from June 14 to 18 shows the majority of those asked said the winner will have “just some impact” to “no impact” on the economy. Not even one-third of the American voters polled said they think the economy will get better in the next year.

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

  • Gold, $1,585.30, Up $17.90.
  • Silver, $27.58, Up $0.81.
  • Platinum, $1,441.20, Up $8.00.
  • Palladium, $607.50, Down $0.70.