Stocks Still Gaining After QE3; Gold Outlook Positive

Global markets continue to rally today following Thursday’s announcement of the United States’ aggressive bond-buying plan. News of the program lifted the S&P 500 to its highest single day peak since January 2, 2008. The market reaction is not unexpected. Investors will await the long-term effects of the latest round of quantitative easing (QE3) as the Federal Reserve announced it will inject $40 billion dollars a month into the U.S. economy until the jobs market realizes prolonged growth.

Bullish investors are still impeded by one final obstacle as Spanish Prime Minister Mariano Rajoy continues to delay acceptance of the European Central Bank’s stimulus package which was announced last week. Economists continue to assert that a bailout is inevitable and necessary for the country which currently renders one out of four workers jobless. Rajoy “needs to bite the bullet on aid while the going is relatively good,” Derks said, in a note. “The current market calm is merely a facade created by a fortuitous alignment of various forces. Better to get pen to paper now, rather than be forced kicking and screaming in a few months time.”

As expected, the announcement of QE3 caused a significant spike in the gold price on Thursday. Though it has traded relatively flat today, analysts predict continued upward movement for the metal as the Fed gears up to indefinitely pump funds into the struggling U.S. economy. “You’ve got gold, a fixed quantity, and central banks printing more money. Ergo, gold becomes more expensive,” Richard Cookson, global chief investment officer at Citi Private Bank, told CNBC Friday. “The cost of holding gold is zip, because interest rates are effectively zero. So you print more currency, and the gold price goes up because you price in that extra currency.”

At 1:00 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,773.90, Up $2.80.
  • Silver, $34.71, Down $0.08.
  • Platinum, $1,714.60, Up $34.10.
  • Palladium, $701.20, Up $12.20.

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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QE3 decision coming at 12:30 P.M. EDT

 

Gold and Silver prices are mostly flat this morning as investors await a Federal Reserve monetary policy decision.  Fed Chairman Ben Bernanke is scheduled for a press conference at 2:15 p.m. (EDT), though the policy decision should be out closer to 12:30 p.m. (EDT).  David Morrison of GFT Markets believes that the markets have “priced in significant action from the (Fed).  The expectation is for a further round of large-scale asset purchases similar to 2010’s $600 billion QE2 program.” He continued, “The language accompanying another round of quantitative easing will be all-important” because if the Fed decides to wait, the markets could be in for disappointment.

Prices remained stable after the weekly jobless claims report was released.  Claims rose by 15,000 last week, about 12,000 more than expected.  Guy Berger of RBS Securities, Inc. said, “The labor market continues to be disappointing.  We’d like to see the hiring side pick up.  Companies are very cautious given all the uncertainty.”

One of the countries hit hardest by the eurozone debt crisis is Spain, which boasts the third-largest economy in the eurozone.  Spain’s prime minister Mariano Rajoy suggested to parliament yesterday that Spain may not need to ask for a bailout due to the success of the European Central Bank’s bond-buying program.  Many experts believe a bailout will be necessary eventually, however, and the delay in asking for one could prove to make things worse by way of conditions for receiving bailout funds.  Goldman Sachs analysts wrote, “The more the Spanish administration indulges domestic political interests and is perceived to be taking undue advantage of external support, the more explicit conditionality is likely to be demanded.”

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

  • Gold, $1,734.40, Up $1.70.
  • Silver, $33.21, Down $0.09.
  • Platinum, $1,661.40, Up $10.80.
  • Palladium, $684.60, Up $5.30.

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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The “Bond King”- PIMCO’s Bill Gross says Buy Gold!

Bill Gross says to buy gold not bonds. In an interview on Bloomberg News today, Mr. Gross said that to continue believing that stocks or bonds can return 10% is a dying belief. Mr. Gross commented that, “Gold cannot be reproduced. It could certainly be taken out of the ground at an increasing rate but there is a limited amount of gold. And there has been an unlimited amount of paper money over the past 20 to 30 years now – in this period of central bank expansion where it’s QE1 or QE2, or whether it’s the LTROs of the ECB or this potential new program…then central banks are at their leisure to print money.” He further goes on to say that with central banks writing checks for trillions of dollars, it is a good idea to own something that cannot be reproduced such as gold.

Profit taking is the most probably reason that precious metals markets are down slightly this morning. The big event this week is the Wednesday-Thursday Federal Reserve meeting and the high expectation of many, that Fed Chairman Bernanke will announce QE3 on September 13. The sluggish jobs report on Friday might be the event the finally triggers this announcement. The ECB and China announced stimulus plans last week.  many expect the U.S. to be next.

At 9AM EDT the APMEX precious metals prices were:

  • Gold price – $1,731.30 – down $8.30
  • Silver price – $33.50 – down 19 cents
  • Platinum price – $1,594.50 – down $2.80
  • Palladium price – $659.00 – up $4.30
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End of week Gold and Silver recap: Gold breaks $1,700

Model of the ECB's new headquarters, which is ...

Model of the ECB’s new headquarters, which is due to be completed in 2014. (Photo credit: Wikipedia)

Written by John.Foster@APMEX.com

Gold Breaks $1700:

Gold continued it march past $1700 an ounce as growing signs the European Central Bank will take action added to disappointing U.S. economic data this week.  Fridays United States nonfarm jobs report showed 96,000 jobs were created in August. The number was disappointing because it fell short of the 125,000 that had been expected. The August manufacturing report showed the largest drop in more than three years. The nation’s factory activity was rated at 49.6, which indicates an unforeseen contraction in the sector. United States construction also fell off by 0.9 percent; as with the manufacturing report, experts had predicted an increase, as well.  This news was bullish for Gold and boosted the possibility of financial stimulus from the Federal Reserve. The expectation is that the Federal Reserve will announce the next round of quantitative easing, better known as QE3, this year. Jeremy Friesen at Societe Generale in Hong Kong said he believes the Fed will act possibly this month. He said, “We think the payrolls number will be very poor, which should be positive for Gold, as it would confirm that the Fed will do something at the next FOMC (Federal Open Market Committee) meeting.”

Europe Announces Bond Program:

The European markets started the week strongly on hopes that the ECB would announce a plan to curb widespread debt in the region. Many economists in the area believed there would be a large bond buying plan to offset short term debt. One media report went as far to say the ECB will spend “unlimited” amounts to do so, and that caused quite a stir. “I think the market saw the word ‘unlimited’ and jumped before realizing that the ECB would not expand its balance sheet as it would sterilize all its purchases, and thus this was not the kind of aggressive monetary expansion that FX traders were looking for,” said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York.  On Thursday the European Central Bank announced its intention to rebuild the eurozone with new stimulus measures by purchasing sovereign bonds. Alex Merk at Merk Investments commented on how the market may be more interested in the euro. “Now, I’m not going to pretend that everything is going to be great in the eurozone, but it (the ECB’s measures) does take off the so called ‘tail risks,’ it makes the euro less risky.” On a positive note, Merk added, “We think the euro is going to do well in the years to come. … It is becoming a different currency with different dynamics in place.”

China’s Economy Slowing:

The United States and Europe may not be the only economies on the verge of receiving a stimulus. Although the Chinese government has yet to implement any stimulus measures in the face of a slowing Chinese economy, there is additional evidence that the Chinese economy is slowing. On Saturday (09/01), the official manufacturing sector survey reported a 49.2 reading in August. This falls below the level of 50 that separates expansion from contraction. In another survey more focused on small to midsize businesses, published by HSBC, the number was 47.6.  Gordon Chang, author of “The Coming Collapse of China,” spoke with CNBC regarding China’s economy and how some data reflect zero growth for that nation. Chang said that manufacturing surveys, price indices and electricity production are all key indicators of economic growth, and those factors suggest no growth in China’s economy. Chang said, “By far the most reliable indicator of Chinese economic activity is the production of electricity. When you look at the period of April through July electricity production increased by less than an average of 1.2 percent.”  He said electricity production typically outpaces economic growth

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