APMEX Weekly Report

Gold Remains in Demand:

The headlines this week have been dominated by the struggles of the global economy and the uncertainty of investment options. However, Gold has shown to be a steady option recently. “Gold (is one of the most liquid ways) to get exposure to inflation. The volatility… will remain low going forward as the ugly head of inflation will emerge, and we will see a steady increase in gold demand,” said Michael Mullaney, at Fiduciary Trust in Boston.  With questions regarding the United States’ economic future and the global economic slowdown, many investors are left looking for a solid investment.  Though Gold fell this week, open ended fiscal policies engaged in by central banks are expected to boost prices in the long run. Credit Suisse forecast an average price of $1,840 per ounce for the year 2013. HSBC’s James Steel stated that he does not predict Gold to fall below $1,750 per ounce. Historically, price pullbacks such as this have presented excellent buying opportunities for investors.

 

How Steep is the Fiscal Cliff:

Despite recent strong gains in the U.S. stock market, investors braced for the worst earnings season since 2009. Analysts are expecting earnings to decline, after 11 quarters in a row of gains. These poor results are attributed to the slower than expected U.S. economic recovery and the overall economic slowdown worldwide.  Americans are also expecting the worst for the end of 2012 when the United States government is forced to deal with scheduled spending cuts and tax increases, referred to as the “fiscal cliff.” Spending cuts will disrupt more than 1,000 mandated government programs. Tax assistance laws put into place by the Bush administration and extended during the Obama administration are set to expire Dec. 31, 2012. It is predicted that the economy could be heading towards another recession if it is not handled properly and in a timely manner. Chad Stone at the Center on Budget and Policy Priorities believes the circumstances may not be so severe with the “fiscal cliff” acting more like a “fiscal slope” that the economy can easily recover from. Stone said, “The slope would likely be relatively modest at first. A relatively brief implementation of the tax and spending changes required by current law should cause little short term damage to the economy as a whole.”  The main point of emphasis is the tax cuts that are set to expire at the first of the New Year. If they are allowed to expire without any action, the effects could be felt worldwide. “It’s very clear that if the whole tax package moves off the table it will immediately bring the U.S. into a recession, which will have a huge negative impact on the whole world,” said Zhu Min, deputy managing director of the International Monetary Fund.

 

Greek Debt May Need More Work:

German Chancellor Angela Merkel’s words of support for Greek Prime Minster Antonis Samaras were overshadowed this week by new data indicating that Greece’s debt situation may require yet another round of restructuring. The International Monetary Fund (IMF) warned Eurogroup finance ministers that Greece will miss the five year debt reduction target required for its 130 billion euro bailout. The IMF also has concerns that it will be nearly impossible to get the Greek debt level below the 120 percent of economic output by 2020 as hoped. Chancellor Merkel’s visit to Greece, the first since the debt crisis began in 2009, saw significantly increased security as Greek protesters took to the streets to vent their anti-German sentiment.  Chancellor Merkel’s call for austerity measures is not popular with the Greek populace. Greece prepared for two days of strikes with over 7,000 plainclothes police and hundreds more undercover agents.

End of the week report: Spain, QE3 and Gold Prices

 

Gold Consolidates:

 

 

 

 

 

“After rapidly rising between mid-August and mid-September, Gold has since been consolidating,” BNP Paribas analyst Anne-Laure Tremblay said. “Short term, we could see a limited correction before the price resumes its ascent. The U.S. dollar has been strengthening of late, particularly against the euro. This is likely weighing on the Gold price. Beyond this, the Gold market is just taking a breather, as it is not far off the $1,800 an ounce level, which constitutes a strong resistance.” The break in price in Gold has not gone unnoticed by investors. Gold-backed funds increased by almost 300,000 ounces this week according to reports.  One piece of news that also gained attention this week is the amount of Gold that countries have been adding to their central banking systems. South Korea and Paraguay lead all other countries by adding more than 24 tons of Gold to their reserves in July alone. “Whether you’re looking at physical flows into ETFs or the options market, activity has clearly been on the bullish side, and that will see prices move higher as we go through the fourth quarter,” said Credit Suisse analyst Tom Kendall.

 

 

 

 

 

QE3 Questions?:

 

 

 

 

 

Not all members of the U.S. Federal Reserve appear to agree on the benefit or effectiveness of the recently announced new round of quantitative easing (QE3). Charles Plosser, President of the Federal Reserve Bank of Philadelphia, is concerned that not only will the new bond-buying program not work, but that it might also call into question the credibility of the U.S. central bank. “We are unlikely to see much benefit to growth or to employment from further asset purchases,” said President Plosser. “Conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed’s credibility.” U.S. investors are buying U.S. Treasuries at a quicker pace than international investors for the first time since 2010. This has certainly contributed to the U.S. debt climbing above $16 trillion USD for the first time. U.S. Treasuries have become popular despite their record-low yields because many investors also share the concern that QE3 will not succeed in stimulating the economy and creating more jobs. International investors still own 50.4 percent of the U.S. Treasuries, but this is down from the 55.7 percent share owned in 2008.

 

 

 

 

 

 

 

 

 

 

 

Spanish Gamble?:

 

 

 

 

 

Spanish Prime Minister Mariano Rajoy seemed to be gambling with his country’s well-being. The latest speculation out of Spain was that Rajoy was delaying a bailout request because he believed that issues in Italy will worsen, making the bailout terms friendlier for Spain when it does finally request a bailout. Raphael Gallardo of Rothschild Asset Management said that Spain “would be in better company and would suffer less of a stigma if it was to ask for a rescue at the same time as Italy. Italy needs further austerity efforts so those are probably more reachable with the support of the European Union and the ECB.”  Protests on the streets of Spain intensified during the week as the country began to roll out economic reforms along with its new budget.  Prime Minister Mariano Rajoy said, “We know what we have to do, and since we know it, we’re doing it. We also know this entails a lot of sacrifices distributed… evenly throughout the Spanish society.” His words, and the measures he intends to enact, are not enough to soothe all dissenting voices. A member of parliament was quoted as saying, “On paper they can make it all add up, but it will be hard to make the budget credible given all the reasonable doubts on the deficit target. It will be really tough to make the markets buy it.”  An audit of Spanish banks was also expected to be completed this week. The eurozone’s third largest economy has seen much trouble lately, and has been hit hard by the housing crisis. Citizens of Madrid continue to protest the announced austerity measures , and one region of the country has even threatened to break away from Spain. The overwhelming expectation is that these measures are the first part of Spain formally requesting a bailout from the European Union. At one point, Spain was feared as “too big to fail,” or at least too big to bail out, so it will be interesting to see how the EU handles this situation.

 

 

 

 

 

 

 

 

 

 

 

 

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Greece and Spain hurt euro, drive down metals prices

 

Precious Metals are trading lower this morning, as central bank buying finally wasn’t enough to keep prices in positive territory.  Renewed concerns out of Greece and Spain have driven the euro downwards and strengthened the dollar.  However, analysts at Commerzbank noted, “Central banks are likely to continue to buy gold for the remainder of this year, thereby stripping supply from the market and contributing to climbing gold prices.”

Protesters have taken to the streets of Greece and Spain yet again.  The fresh Greek government is currently working on a budget with the European Central Bank, International Monetary Fund, and European Commission in order to receive more bailout funds.  The problem is that the Greek people have apparently reached a breaking point on austerity measures.  Author and economist Vicky Pryce said, “They are trying to see whether they can have a stay of execution, and the protests are actually probably going to help, because it’s obvious that they can’t take any more austerity.  The cost has been great for the Greeks … There’s just no light at the end of the tunnel at present.”

Spanish Prime Minister Mariano Rajoy seems to be gambling with his country’s well-being.  The latest speculation out of Spain is that Rajoy is delaying a bailout request because he believes that issues in Italy will worsen, making the bailout terms more friendly for Spain when it does finally request a bailout.  Raphael Gallardo of Rothschild Asset Management said that Spain “would be in better company and would suffer less stigma if it was to ask for a rescue at the same time as Italy.  Italy needs further austerity efforts so those are probably more reachable with the support of the European Union and the ECB.”

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

  • Gold, $1,747.90, Down $17.50.
  • Silver, $33.69, Down $0.27.
  • Platinum, $1,621.60, Down $11.20.
  • Palladium, $624.00, Down $16.80.

 

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Gold Pushing Towards $1700 – Silvers Above $32

 

European Central Bank

European Central Bank (Photo credit: Travel Aficionado)

 

Comex gold futures are slightly higher this morning setting new five month highs. Gold and silver prices shot upwards after Fed Chairman Ben Bernanke seemed to open the door to QE3 in his speech last week from Jackson Hole. Now, markets are focused on the monthly meeting of the European Central Bank, which takes place on Thursday. Many analysts expect the ECB will announce a monetary stimulus plan that will boost both stocks and precious metals.

 

Adding more pressure to the ECB, Moody’s Investors Service changes its euro zone outlook to negative. Moody’s warns that if they cut the ratings of the European Union’s four biggest budget backers: Germany, France, the U.K. and Netherlands, they might just downgrade the entire bloc.

 

The U.S. 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 their economy is slowing. On Saturday, the official manufacturing-sector survey came out 49.2 in August. This falls below the level of 50 that separates expansion from contraction. In another survey more focused on small to mid-size business, published by HSBC, the number was 47.6.

 

At 9AM EDT the APMEX precious metal prices were:

 

  • Gold price – $1,691.70 – up $5.60
  • Silver price – $32.20 – up 76 cents
  • Platinum price – $1,558.10 – up $19.80
  • Palladium price – $640.80 – up $11.40

 

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End of week Gold and Silver report

 

Gold waited all week for direction:

As the week started gold and other markets had all eyes on a small town in Wyoming called Jackson Hole. That is where an annual meeting is held by the U.S. Federal Reserve and in the past has given way to significant monetary action such as two rounds of easing. There was a lot of speculation and waiting for news. For some, it was not going to be an extraordinary event.  Many financial specialists believe the Jackson Hole meeting will not be the critical event that could trigger further government financial stimulus this time around. “The critical period is really from Friday to the 12th (of September) — the constitutional court decision,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vt. Many others shared a different view of the meetings of the Fed. While the question remains whether there will be another round of monetary easing, if the answer is “no,” it could affect Gold’s price. “We see near term risks of a reversal if Jackson Hole does not deliver what the market is hoping for,” said Nick Trevethan, senior metals strategist at ANZ in Singapore. Friday came and so did the report with Federal Reserve Chairman Ben Bernanke giving indications that the Fed will soon embark on another round of bond buying, otherwise known as quantitative easing (QE). “It is important to achieve further progress, particularly in the labor market,” Bernanke said. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” Bernanke cited previous rounds of easing as effective in stimulating economic development and job creation without hastening inflation.

Europe still trying to work through issues:

Europe clearly took a backseat this week to the Fed’s potential monetary easing announcement, but the European Central Bank (ECB) is readying for an ECB Governing Council meeting next week. James Reid of Deutsche Bank said, “For now, Europe is in a holding pattern ahead of clarity surrounding the next move in the great ECB bond buying maneuverings, and the U.S. is in limbo ahead of Bernanke’s Jackson Hole appearance tomorrow. For the latter, speculation mounts that Bernanke won’t say anything overly new in his speech.” The eurozone is in a battle of its own, regardless of what the Fed decides. 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 June elections. Private sector deposits are up about 2 percent. The World Gold Council is suggesting a creative way of looking at Gold in the eurozone. Many pundits have suggested that troubled eurozone countries sell Gold to take care of their debts. This ill advised idea sounds like a simple resolution, but of course it is more complicated than that. The World Gold Council has suggested bonds and loans backed by Gold. Some groups (LCH.Clearnet, Intercontinental Exchange, and the Chicago Mercantile Exchange) have begun accepting Gold as collateral for margin requirements recently. Gillian Tett of Financial Times wrote that this “suggest(s) that a slow evolution of attitudes is under way — not so much in terms of the desirability of Gold per se, but the increasing undesirability and riskiness of other supposedly ‘safe’ assets, such as government bonds.”

United States economy still giving mixed reports:

In the U.S.A., a trend of economic growth could be a reason the announcement of another round of easing by the Federal Reserve was not made today. One discussion is surrounding the small amount of growth and whether it is enough to sustain a positive direction moving forward. The United States’ gross domestic product (GDP) went up in the second quarter by 1.7 percent, which was 0.2 percent more than a previous estimate. The GDP is seen as a key indicator of the economy. While there was improvement, many believe it was at a level low enough to warrant more action by the Fed. The release of the weekly jobless claims report has had little effect on Gold and Silver. The four week moving average of new claims rose by 1,500, while the week to week change was flat. Personal consumer spending increased in July to a five month high, according to data from the Commerce Department. Falling gasoline prices coupled with moderate increases in income to provide consumers a bit more to spend this midsummer. Despite July’s increase, consumers have been cautious on spending for most of the year, with a decrease in June and a flat report in May. “In the first quarter of the year, Americans saved less in order to spend more,” said Chris Christopher, senior economist at IHS Global Insight. “In the second quarter, job prospects were not very promising, so Americans put more money aside and spent less.”

 

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Questions about currency, Greece asks for more time

The chairman of Rogers Holding, Jim Rogers had some very direct statements regarding his investment outlook in a recent interview. On the topic of global currencies and their future, the chairman was quoted as saying, “paper money is becoming more suspect”. When asked about gold he said that it “has been used for thousands of years and he’s not one to question history.”  He also added that the “cracks” have started show in global currencies and “maybe within ten years we won’t use paper money.”

Talks have begun between European Union leaders today regarding the economic crisis that is ongoing in the region. One of the main topics is going to be the country of Greece and their ability to pay back the loans they have taken from the EU. Greek Prime Minister Antonis Samaras is making his case to get an extension on deadlines to pay back the funds.  “All we want is a bit of ‘air to breathe’ to get the economy running and to increase state income. More time does not automatically mean more money,” Samaras said. The main issue revolves around the Greek government agreeing on an exact plan to raise the funds needed. If the debt continues to go unpaid there could be more talk of Greece exiting the union.

In the United States, there is a small town in Wyoming that has the attention of the economic world. In Jackson Hole, Wyo., the Federal Reserve is holding its annual meeting of many of the top central bankers from around the world. In the past, these meetings have given way to market-shaping events such as monetary easing. As for this year’s meeting, most experts aren’t expecting much, if anything. After the meetings the Fed’s Chairman, Ben Bernanke will speak publicly to give his notes on the event.  “I don’t think he’s going to say anything new,” added Catherine Mann, a finance professor at Brandeis University.

At 1:00 pm (EDT), the APMEX precious metals spot prices were:

  • Gold, $1640.00, Down $1.40.
  • Silver, $29.58, Up $0.04.
  • Platinum, $1526.60, Up $17.80.
  • Palladium, $630.40, Up $4.70.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 7 p.m. (CDT)! Or call us Fridays until 5 p.m. (CDT)! 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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John Paulson has more than 44 percent of his equities now in gold

 

John Paulson has more than 44 percent of his equities now in gold. At this time last year Mr. Paulson had 25 percent in the yellow metal. That’s an increase of 19 percent of his 21 billion dollar hedge fund towards gold. The last time he was this invested in the metal was March 2009, when he had about 46 percent invested. Gold prices went lower in the second quarter, the largest loss since September 2008.

Today’s movement in the gold market has shown the affect another round of monetary easing could have on pricing. Just because there have been signs of an economic slowdown in the U.S.A., some economist think it is not a foregone conclusion that the Fed will act. “While further monetary easing remains a viable option for the Fed, the timing may be delayed for more dire conditions,” said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York. In the second week of next month there will be a meeting of the Federal Reserve that could help outline the direction they will be taking.

In the last few months there has been talk of Greece making an exit from the European Union. The leaders of the union promised to do everything in their power to keep it together. The intention may be good, but the reality could be Greece leaving sooner than later. “It’s a question of when, not if. Next month there is the ratification of the ESM [European Stability Mechanism] in Germany and you may well see a situation where Greece leaves the euro, the ESM is ratified and Spain and Italy then go in and ask for the money. There is a feeling that time is running out,” Paul Day, Chief Strategist, at Market Securities said in an interview.

At 1:07 pm (EDT), the APMEX precious metals spot prices were:

  • Gold, $1604.00, Up $3.10.
  • Silver, $27.86, Down $0.01.
  • Platinum, $1397.10, Down $3.00.
  • Palladium, $579.40, Down $0.60.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 7 p.m. (CDT)! Or call us Fridays until 5 p.m. (CDT)! 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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