Spain formally requests EU aid

Uncertainty in Europe has led to American stock futures falling and Precious Metals prices remaining flat.  A two-day European Union summit meeting is set for later this week, but Peter Boockvar of Miller Tabak said that “nothing of substance will come” of the meeting.  He added that German is “just not giving into the requests for largesse that the rest of Europe wants them to disperse in the form of socializing debt obligations in the euro region.”

After informally making the request last weekend, Spain has formally requested aid from the eurozone.  Olli Rehn, the EU’s top economic official, said that it could happen in a matter of weeks, adding, “The policy conditionality of the financial assistance … will be focused on specific reforms targeting the financial sector, including restructuring plans which much fully comply with EU state aid rules.”

Gold seems to be in a holding pattern at the moment.  Macquarie analyst Hayden Atkins said, “The broader picture suggests gold could move a bit lower, but it will stay in this range until we see definitively whether the bulls will be right about the printing presses at central banks ramping up again, or whether they will hold fire until the world gets a lot worse.  It is in a wait-and-see kind of mode,” suggesting that increases in the Gold price are likely, and that it’s just a matter of ‘when,’ not ‘if.’

At 9:26 a.m. (EDT), the APMEX precious metals spot prices were:

  • Gold – $1,573.90 – Up $6.50.
  • Silver – $26.85 – Up $0.08.
  • Platinum – $1,435.90 – Up $2.70.
  • Palladium – $607.90 – Down $0.40.

APMEX End of Week Report 6/22/2012

No QE3… Yet
Precious metals prices fell this week after the Fed announced that it was not yet ready to embark on a third round of aggressive stimulus, known as quantitative easing, or QE, although an extension of the Fed’s program known as “Operation Twist” was announced.  The outlook for Precious Metals remains tied to any Federal Reserve indication of further QE, as well as the European economic situation.  Advisor Bill O’Neill said, “At least for the near term, it’s mainly a short term negative for Gold because it indicates that there won’t be immediate and new aggressive accommodation, and certainly no QE3 at all judging from this statement.”

“Currently we’re seeing a bit of follow through from disappointed investors, but believe we should be finding support pretty soon,” Saxo Bank Vice President Ole Hansen said.  “(Fed Chairman Ben) Bernanke left the door open and extended the expected period of low interest, which is good news for Gold.  Overall I think the market is not ready to let go of Gold, as it still looks like one of the better bets should the economic outlook continue to deteriorate.”

Spain moves to forefront as Greek elections settle turmoil

Optimism from Greece’s election is wearing thin thanks to renewed worries from Spain.  In Greece, Sunday’s election seems to be a victory for a pro-austerity party, though investors seem to be waiting for more information from Spain before they get too excited.  Steen Jakobsen of Saxo Bank said, “The market knows this is about buying time, and as the main story is now Spain … we need more details on banking reports and Germany’s intention.  It’s more concerning that (shortly into the European trading day), Spain is back in focus.”

Bond yields on Spanish government debt hit a fresh high this week, signaling the market’s growing reluctance to continue loaning money to the insolvent country.  Yields topped 7 percent, the highest since Spain joined the euro.  “By requesting external assistance for the eurozone’s fourth largest economy, the … government has pushed Spain, Italy and the bloc as a whole into uncharted waters,”  said Nicolas Spiro, managing director of Spiro Sovereign Strategy.  In criticism directed toward the government of Spanish Prime Minister Mariano Rajoy, Spiro said, “Politically speaking, the ‘line of credit’ to Spain has already failed.”

Moody’s Downgrades Credit of Largest Banks in the World       

Moody’s downgrade of 15 international and domestic banks had been anticipated by the banking industry but still is throwing a wrench in the plans, as the downgrades do affect the lending costs of these banks. A key factor in the announcement is which banks weren’t downgraded.  Some observers said Moody’s intent with this downgrade was to, in some sense, laud the banks that are stable with secure bank deposits from its customers.  Citigroup wrote, “The new ratings landscape could provide a competitive edge for higher rated firms. …  Markets tend to discriminate more between issuers at lower ratings — in terms of funding costs — particularly during times of stress.”  The fact that these banks were flagged previously helped to minimize market impact, but market impact is still felt.

Gold prices ease on caution ahead of Fed statement

American stock futures are trading slightly higher this morning, while the Gold price has dropped.  This movement comes ahead of a highly-anticipated Federal Reserve policy decision which could bring about a new round of quantitative easing.  Nick Beecroft of Saxo Capital Markets U.K. explained that while QE is the hope of the markets, the Fed is more likely to announce an extension of Operation Twist, its bond-buying program.  “This will probably disappoint equity markets, which seem to be expecting ‘another shot of heroin,’” he said.

European leaders fleshed out a list of concrete steps to potentially solve its debt crisis in front of a Group of 20 (G20) summit, with the G20 leaders supporting what the eurozone brought to the table.  U.S.A. President Barack Obama said that it was clear that the leaders know what steps need to be taken to shore up the debt crisis, adding, “None of them are going to be a silver bullet that solves this thing entirely … in the next week or two weeks or two months, but each step points to the fact that Europe is moving towards further integration rather than break-up.”

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

  • Gold – $1,605.60 – Down $18.10.
  • Silver – $28.20 – Down $0.27.
  • Platinum – $1,459.90 – Down $22.60.
  • Palladium – $624.90 – Down $5.50.

What will be Gold’s Next Move? Potential QE3 Announcement Wednesday

Precious metals prices have remained stable throughout the day following this morning’s trends with little movement. Federal Chairman Ben Bernanke will hold a press conference Wednesday and it is expected that additional easing measures will be announced. Anne-Laure Tremblay from BNP Paribas wrote in a note to clients, “Probable actions include interest rate cuts by the European Central Bank and the People’s Bank of China [and] further quantitative easing by the Federal Reserve,” she said, adding that such action would likely support gold buying. “Quantitative easing, or an expansion of a central bank’s balance sheet, is more favorable for gold prices…[as it] tends to have a strong negative impact on the U.S. dollar and is also more likely to raise inflationary expectations.”

As the Federal Reserve continues its two-day policy meeting tomorrow with a hopeful resolution to stimulate America’s economy analyst Dick Bove is patiently waiting, but not quietly. Bove considered what a third round of quantitative easing would actually do for the financial system he said, “It seems clear that the United States economy’s growth is slowing and that the global economy is facing major challenges. This suggests a need for some action by the Federal Reserve and other central banks,” Bove said in a note to clients. “It also appears to be just as evident that lowering interest rates to zero and printing more money are not effective options.”

At 5:01 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,619.50, Down $8.00.
  • Silver, $28.47, Down $0.30.
  • Platinum, $1,481.50, Down $4.60.
  • Palladium, $630.40, Down $3.80.

Europe in the Crosshairs of G20 Leaders

First on the list of priorities at the meeting of the leaders of the world’s twenty largest economies is – no surprise here – the financial crisis in Europe that has been stewing for over two years now.  President Barack Obama has scheduled one-on-one meetings with German Chancellor Angela Merkel about the European crisis, and Russian President Vladimir Putin about the conflict in Syria, in which Russia plays a large role as Syria’s primary arms supplier.

Bond yields on Spanish government debt hit a fresh high today, signaling the market’s growing reluctance to continue loaning money to the insolvent country.  Yields topped 7 percent, the highest since Spain joined the Euro.  “By requesting external assistance for the euro zone’s fourth-largest economy, the Rajoy government has pushed Spain, Italy and the bloc as a whole into uncharted waters,” said Nicolas Spiro, managing director of Spiro Sovereign Strategy.  “Politically speaking, the ‘line of credit’ to Spain has already failed.“

Elections in Greece on Sunday failed to calm jittery markets as stocks and commodities turned negative today.  After the pro-Euro and pro-bailout New Democracy party won in Greece, Michelle Gibley, director of international research at the Schwab Center for Financial Research said, “Even though we avoided the worst-case scenario in Greece, the crisis has entered a new and dangerous phase, and it doesn’t end with Greece.”

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

  • Gold, $1,629.30, Up $0.70.
  • Silver, $28.78 Down $0.06.
  • Platinum, $1,484.80, Down $4.40.
  • Palladium, $635.60, Up $4.30.