Weekly Gold & Silver Market Recap – 5/10/2013

GOLD ENDS WEEK LOWER
As the week comes to a close, Gold is sitting at a two and a half week low. On Tuesday, the first of numerous reports that affected the price of Gold came out of Europe regarding formation of a banking union. This has caused a belief that there will be less financial risk in the region, which has in turn caused a drop in safe haven assets such as Gold. “Any indication that Europe is working towards a resolution is bad for Gold,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Money is flowing into riskier assets like equities.” The next move in the Gold price came on Wednesday when the U.S. weekly jobless claims fell to a five year low. Improved labor conditions tend to put pressure on the yellow metal due to the Federal Reserve’s preservation of a low federal funds rate as compared to the unemployment rate. If the Fed raises interest rates, the market perceives that as a sign they may also cut back on current monetary policy, which makes Gold shine as a safe haven asset. “Jobless claims were better than expected, indicative of a recovering U.S. economy, and the dollar is a little bit stronger … In that kind of environment you would expect Gold to come under pressure,” Deutsche Bank analyst Daniel Brebner said. The Gold price declined as the U.S. dollar strengthened against the yen and investors focused on Federal Reserve Chairman Ben Bernanke’s speech Friday morning. Expectations that Bernanke might reveal a plan to slow the Fed’s bond purchase program weighed on the metal as similar rumors have negatively impacted Gold in the past. Friday’s price dip drove Gold down 2.5 percent to its lowest level in two weeks.

GOLD STILL SHINES FOR MANY
Even in the face of lower Gold prices, many investors and market analysts believe the future for the yellow metal is strong. Investors have noticed the movement metals have experienced and continue to feel confident purchasing hard assets. New concerns come from the Federal Reserve’s proposal to modify quantitative easing (QE) based on recent positive economic data. “With the Fed’s recent commitment to stand ready to alter the pace of QE, based on employment and inflation expectations, bullion prices are likely to remain highly sensitive to changes in U.S. employment data,” HSBC said in a note. Andy Xie of MarketWatch believes that with growth stuck at about a two percent range and inflation seemingly rising in the future, the U.S. is in a period of stagflation. Xie wrote, “Despite its recent setback, Gold remains a big beneficiary of the current macro environment. It could make a new high in the current year and rise much higher in 2014. The Gold bull market will end when an inflation crisis pushes central bankers around the world to tighten aggressively… For the masses, Gold is the best inflation hedge.” Last month, Gold imports into China more than doubled, setting an all-time high. One of the most impressive things to note is that all of this happened before Gold’s price dropped in April. “This is quite out of expectation as all these imports were done before the market slump in April. Judging from the explosive growth of trading volume on the Shanghai Gold Exchange in the second half of April, and anecdotes that many jewelry shops are sold out throughout the country, imports might be even more substantial in April,” said Qu Mingyu, a trader at Bank of China, one of the country’s three largest bullion banks.

At 4:00 pm (EDT), the APMEX precious metals spot prices were:

Gold, $1445.30, Down $25.60.
Silver, $23.85, Down $0.15.
Platinum, $1491.80, Down $26.20.
Palladium, $709.00, Down $7.80.

For more APMEX reviews of daily and weekly Precious Metals market activities, visit our News and Commentaries page.

Anticipation for Friday grows, affects the markets

 

The dominant news of the week will be speculation as to what will or won’t be announced during the annual Jackson Hole symposium.  Anticipation leading up to those announcements left stocks flat.  David Morrison, senior market strategist at GFT Markets in London, said “There are hopes that the Fed chairman will signal that another round of quantitative easing (QE) is imminent, although it seems more likely that he will keep investors guessing, while assuring them that the Federal Reserve stands ready to intervene further, if required.”

 

The eurozone is in a battle of its own, regardless of what Bernanke says at Jackson Hole.  Spain is being sucked into the center of the eurozone debt crisis.  Spanish consumers have pulled as much as 5 percent of their private sector deposits.  The other side of this coin is that Greek banks are seeing a boost in their deposits since their June elections.  Private sector deposits are up about 2 percent.

 

Official portrait of Federal Reserve Chairman ...

Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)

 

Gold is riding a three month increase in price, up 3.1 percent.  This is the highest percentage increase since January.  The rising prices are fueled, in part, by expectations for what will come from the Jackson Hole meeting.  Gold’s meteoric rise in price, doubling since 2008, has been fueled by the Fed’s QE tactics.  For those that are risk adverse, gold holds a strong appeal; as currencies inflate, gold will always be a store of wealth as its value is historically independent of any one currency.

 

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

 

  • Gold, $1,665.40, Down $8.70.
  • Silver, $30.90, Down $0.24.
  • Platinum, $1,524.50, Down $29.70.
  • Palladium, $640.40, Down $15.80.

 

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All eyes on the Fed

 

The primary topic of discussion today will be the release of the minutes from last week’s Federal Reserve meeting. Ahead of that announcement, speculation will abound. Some investors will want more quantitative easing, while others will want more of what we have been getting: inaction. Speaking on CNBC, Art Cashin, director of floor operations at USB, said, “You’re going to need a translator for these minutes.”

The Gold price hit a three month high in overnight trading, going as high as $1,645. Since 2009, central banks have been net buyers of Gold, regardless of the spot price. According to the World Gold Council, central banks bought 158 tons in the June quarter. The ever present eurozone crisis and never improving American financial situation has presented central banks across the globe with a situation in which the yellow metal is the perfect safe haven for their currency reserves.

At 9:09 a.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,640.40, Down $1.00.
  • Silver, $29.48, Down $0.06.
  • Platinum, $1,522.00, Up $13.20.
  • Palladium, $631.50, Up $5.80.

 

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America waits for further stimulus; how are investors measuring the euro

 

Gold fell slightly today with investors taking their earnings after last week’s gains, which was encouraged on the assumption that central banks will provide additional stimulus actions.  “Everybody seems to be waiting for this huge money printing that they think is going to happen which hasn’t happened yet. So, nobody really wants to bet against it, but at the same time they don’t want to go long,” said Doug Roberts, chief investment strategist at Channel Capital Research.

As the European debt crisis continues, it is evident that Europe’s foundation is ultimately taking care of the peripheral countries that have more or less had to be bailed out by the troika of the European Central Bank, International Monetary Fund and European Commission.  The concerns are beginning to rise as the growth numbers for France and Germany are slipping.  Also, for the months of May and June, Germany’s factory orders fell by a disturbing 1.7 percent compared to the forecasted 0.8 percent.  Gerard Lyons, chief economist at Standard Chartered, told CNBC.com. “In the good times, the euro encourages money to go from the core to the periphery, creating booms and busts. In the bad times, it encourages money to go the other way and increases the liabilities of the core.  The euro is a fundamentally flawed concept, and that’s why the core is facing greater challenges. The core can’t cut themselves off completely from the periphery and that’s what markets are responding to.”

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

  • Gold, $1,610.60, Down $10.70.
  • Silver, $27.87, Down $0.31.
  • Platinum, $1,388.50, Down $12.40.
  • Palladium, $574.50, Down $9.20.

 

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Strong euro continue to boost Gold

 

Gold is holding on to morning gains following comments by the president of the European Central Bank, which have buoyed the euro for a second day. “You’ve got a rise in the euro, which means a weaker dollar, and a ‘risk on’ environment, so everything that looks like a risky asset goes up. Gold has been trading just like a commodity (lately) and is behaving like one today,” Natixis analyst Nic Brown said.

European Central Bank President Mario Draghi has stated that as part of the ECB’s effort to protect the survival of the euro, it will be buying Spanish and Italian government bonds. This move also is believed to help lower borrowing costs. “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi said at an investor conference in London. “And believe me, it will be enough.”

Business investment is looking to be cooler in the second half of the year, as orders for business equipment dropped in June. Lower American consumer spending and overseas demand have many companies delaying replacing equipment. “Business investment has definitely shifted lower,” said Tom Porcelli, chief United States economist at RBC Capital Markets LLC in New York. The European debt crisis and the looming “fiscal cliff” will “put downward pressure on orders, which will translate into weaker growth in the U.S.,” Porcelli said.

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

  • Gold, $1,615.90, Up $5.80.
  • Silver, $27.58, Up $0.02.
  • Platinum, $1,404.60, Up $5.20.
  • Palladium, $570.90, Up $4.60.

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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Euro tanks as Spain. Greece issues resurface

 

Renewed worries of a deepening eurozone debt crisis have sent the euro to a two-year low against the American dollar, and Precious Metals are following the former downwards.  Jeremy Stretch of CIBC said, “What began as a Spanish banking bailout looks to be moving rather quickly towards a possible sovereign bailout.  Overlay that with increasingly negative news on Greece and you get a fairly negative mix, so the path of least resistance for the euro is down.”  Spanish bond yields rose to the highest levels in the history of the euro.

The bad news out of Greece comes from reports that the International Monetary Fund (IMF) will no longer provide additional financing for the country.  Greece could be broke by September if it does not receive additional aid from the IMF.  The problem is Greece not being able to (or simply refusing to) meet goals set by the Troika in order to receive aid.  German Finance Minister Wolfgang Schaeuble said, “If there were delays, Greece must make up for them.”

“Dr. Doom” Nouriel Roubini believes that the U.S.A. economy is still on a downward slope.  After saying that rosy forecasts by economists are out of line, Roubini said, “In 2013 … as some tax cuts are allowed to expire, disposable income growth and consumption growth will slow.  The U.S. will then face not only the direct effects of a fiscal drag, but also its indirect effect on private spending.”

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

  • Gold, $1,569.30, Down $15.20.
  • Silver, $26.86, Down $0.53.
  • Platinum, $1,392.90, Down $21.60.
  • Palladium, $565.40, Down $11.70.

 

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Roubini on 2012′s “Global Perfect Storm”

Precious Metals are trading mostly flat this morning, taking a cue from the euro.  The common currency has rebounded slightly since hitting a two-year low on Friday.  Adam Myers of Credit Agricole wrote, “The currency market mood is likely to turn more pessimistic this week as investors return their focus to fiscal-policy challenges.  In the wake of [Federal Reserve, Bank of England, and European Central Bank] announcements, there now appears little on the monetary-policy front to lift investor sentiments.”  Lately, Gold and Silver have largely followed the currency markets, moving inversely to the American dollar.

Two months ago, economist Nouriel Roubini said that four key items, if happening simultaneously, could create a “perfect storm” for the economy.  The four items – a slowdown in emerging markets, military conflict in Iran, the European debt crisis, and growth slowing in the U.S.A. – seem to be coming together now.  Roubini said, “Levitational force of policy easing can only temporarily lift asset prices as gravitational forces of weaker fundamentals dominate over time.”  Historically, Gold has reacted positively in times of economic uncertainty.

American stock futures are falling this morning due to news out of Japan and China.  In Japan, machinery orders experienced their largest fall in over ten years.  Mike Lenhoff of Brewin Dolphin Securities Ltd. said, “We’ve had a bit of a shocker out of Japan.  [The three-day losing streak for stocks] indicates a loss of momentum in the underlying global economy.”  Chinese Premier Wen Jiabao said that downward pressure on the economy in the country is still “relatively large.”  As mentioned by Roubini, China is a key factor in the global economic recovery.

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

  • Gold – $1,586.90 – Up $6.50.
  • Silver – $27.31 – Up $0.32.
  • Platinum – $1,443.00 – Down $6.50.
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