Morning Gold & Silver Market Report – 8/10/2012

FALLING IMPORT PRICES COULD LEAD TO MORE QE

Import prices in the U.S. fell unexpectedly in July, extending the streak to four months of declines.  The decline in import prices could be one more reason for the Federal Reserve to ease monetary policy further.  Historically, tools such as quantitative easing have been very supportive of Precious Metals prices.

The possibility of further easing is one of the reasons gold investors are the most bullish in five weeks, according to Bloomberg.  Among the factors supportive of the Gold price are disappointing economic figures out of China and Europe.  Colin O’Shea of Hermes Investment Management Ltd said, “More quantitative easing will certainly be beneficial to commodities (like Gold).  Do you need more QE to drive the market higher?  Probably not.  The demand side of the equation has been pretty robust.”

The strongest economy in the eurozone, belonging to Germany, is inching closer to a recession.  Joerg Kraemer, chief economist at Commerzbank, said, “The German economy is losing momentum – there’s no doubt about that – and in the third quarter the economy will shrink compared to the second quarter.  Things will go downhill from here.  The German economy is not faring as badly as the rest of the eurozone, but it can’t disconnect itself, especially as growth in China has slowed and continues to do so.”

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

  • Gold, $1,616.90, Down $1.80.
  • Silver, $27.85, Down $0.36.
  • Platinum, $1,402.30, Down $11.50.
  • Palladium, $581.00, Down $7.30.

Gold waits on Central Bank meetings

 

The Gold price has started the week in a holding pattern. After last week’s significant climb of more than 2 percent, the yellow metal is waiting for a signal from the central banks in Europe and the United States this week to determine a course of action. Most expect European Central Bank President Mario Draghi to deliver on a promise he made last week of doing “whatever it takes” to save the euro. If he doesn’t, some believe it could have serious repercussions. “The market will be very disappointed if Draghi doesn’t deliver,” Commerzbank analyst Daniel Briesemann said. “The expectations for the upcoming ECB meeting are very high, and he must say something really significant. If he fails to do so, we will probably see lower commodity prices across the board, due to a stronger U.S. dollar.”

In the United States, the theme of the Federal Reserve discussions continues to be a third round of quantitative easing to help further stimulate the economy. In Europe, there is now talk of a round of easing for that region. The European Central Bank is to announce a decision Thursday regarding its future plan of action. While it is not believed there will be any drastic measures such as monetary easing happening this week, it is expected some action will be taken. That may come in the form of restarting the controversial bond purchasing program or more action on interest rates. Not all members of the European Union agree with such measures. The president of one of Germany’s largest banks is one of them. “The mechanism of bond purchases is problematic because it sets the wrong incentives,” a spokesman for Bundesbank President Jens Weidmann told Reuters.

As the Precious Metals markets await cues from the central banks, so does the stock market. “You won’t get movement either way; the market just has to catch up with itself,” said Ken Polcari, managing director at ICAP Equities in New York. “That being the case, certainly everyone thinks that Europe is going to come out with this big bazooka, and they also think the Fed will launch, so therefore the market is going to stay up here.”

At 1:03 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,619.70, Down $0.60.
  • Silver, $28.10, Up $0.51.
  • Platinum, $1,411.60, Up $3.10.
  • Palladium, $589.40, Up $16.50.

 

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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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Precious Metals prices are on the upswing this morning, following the euro

 

Precious Metals prices are on the upswing this morning, following the euro.  The common currency is rebounding on news that the European Union bailout fund will be able to support troubled Spain by buying Spanish bonds.  Mitsui Precious Metals analyst David Jollie said, “It seems that every time we do not have [a third round of quantitative easing] announced, gold slips back as some of these more speculative positions are liquidated.  After that disappointed selling, I think the market returns to more normal behavior and some of these speculators will try to rebuild positions.  Others such as the official sector are also likely buyers on price declines.”

Federal Reserve Chairman Ben Bernanke’s second day of testimony was as uneventful as expected in the way of QE3 announcements.  Strategists at Lloyds Bank said, “Barring some severe intervening event or drastic downside data prints over the coming 10 sessions, it would appear that the chances of additional monetary stimulus … being announced in the immediate future are receding.  Indeed, the timeline for Fed action is becoming increasingly tight, hemmed in as it potentially is by the looming presidential election in November.”

American stock futures are on the rise this morning, despite an increase in jobless claims.  Economists expected an increase in claims to 365,000, but the actual number came in much higher at 386,000.  These numbers have had less of an effect recently, as Daniel Silver of JPMorgan Chase & Co. explains.  He said, “We have to ignore claims for a few weeks because it’s just too hard to get a true signal from the numbers.  Even just a small mistake in the seasonal factors can generate big changes.”

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

  • Gold – $1,585.40 – Up $13.00.
  • Silver – $27.49 – Up $0.31.
  • Platinum – $1,417.90 – Up $13.70.
  • Palladium – $582.50 – Up $4.00.

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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Europe Crisis Affecting Gold Prices, Global Economic Forecast Lowered

The economic turmoil in Europe has taken its toll on the global economy with gold being no exception. The euro has fallen to a two-year low with the news that the troubled countries are no closer to resolving their issues. The other driving factor in gold this week is the upcoming Federal Reserve report to the U.S.A. Senate Banking Committee. The report is crucial to the economic forecast in the United States. “Gold has been pulled and pushed on the back of expectations of further quantitative easing and remains under pressure from the stronger U.S. dollar,” Suki Cooper, an analyst at Barclays Plc in New York, wrote today in a report.

At the beginning of the year, there were positive signs of an economic turnaround. The job market was getting stronger, profit margins were up, and the industrial markets had solid gains. Today, those same key factors to the economy don’t have the same appeal. The employment numbers have slowed to a crawl, retail numbers are falling, and consumer confidence is waning. A recent survey of economists shows a 30% decrease in employment from last year and a 60% decrease in sales since April. “The survey results suggest worsening economic conditions,” said Nayantara Hensel, a business professor at National Defense University who analyzed the results for NABE. “The rising sales and profit margins experienced earlier in the year may have been short-lived.”

The global growth forecast as set by the International Monetary Fund (IMF) is used to gauge the economic outlook for the world. Today the IMF lowered their expectations for the rest of 2012 and 2013. The main issue continues to be Europe and the economic crisis In the European Union. “Downside risks to this weaker global outlook continue to loom large,” the IMF said in an update of its World Economic Outlook. “The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis.”

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

  • Gold – $1591.70 – Down – $1.80
  • Silver – $27.35- Down – $0.10
  • Platinum – $1417.30 – Down – $17.90
  • Palladium – $578.90 – Down – $7.80
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Weekly Gold and Silver Market Recap for June 6, 2012

by Nicholas Wilsey. Email Robert.

Gold being pulled in different directions:

In the week prior to this one the gold price was riding the high of news of a unified European Union. When Monday started the unification process was clearly going to be a bumpy road and the markets reflected that. However by mid-week talks of a record size stimulus program in Europe raised gold to a two week high. On Thursday and Friday the focus turned to the United States and the job reports. Even with an improvement, the numbers were still low enough to keep most pessimistic. “The Precious Metals bounced strongly when the (payroll) numbers turned out to be below expectations. But after all, the data is a bit mixed: It is not bad enough to suggest the Fed will go ahead with a new round of quantitative easing, but at the same time it is not good enough to exclude it,” said Gianclaudio Torlizzi, a consultant with T-commodity.

Europe continues in economic turmoil:

Over the past few months the news reports out of Europe have created a bleak picture of their financial status. The monthly unemployment numbers for the European Union is at a record high. The unemployment rate is the highest it’s been since the European Union was created in 1999. Compared to the United States unemployment rate of 8.2 percent, the European Union’s rate of 11.1 percent is alarming.  The European Central Bank (ECB) will announce more stimulus measures to buoy a floundering economy in the 17 nation euro currency union. Expectations are that any announcement of stimulus by the ECB would be followed by similar measures from other major central banks. The euro fell to a four week low against the dollar today, held down by a record low interest rate from the European Central Bank

U.S.A. Economy gets mixed reviews

Mixed signals are being sent regarding the future of the American economy. Lowered employment reports and a slowdown of manufacturing activity give reason to believe that America’s recovery has slowed to a stop. However, not all reports have been so negative. Construction spending has risen to its highest level since December 2009. Gary Schlossberg, chief economist at Wells Capital Management, said, “I think it’s interesting that the construction spending numbers do point to the fact that this recovery, such that it is, is being led increasingly by housing, which could provide some support to the economy later in the year.” On the other side is the job report that came out on Friday, where there is not the same optimistic outlook. Jeff Savage, regional chief investment officer for Wells Fargo Private Bank, said, “What a disappointing number. This was kind of disastrous. We’re not even keeping up with demographics at this point. This is not going to be liked in the markets.” Kathy Bostjancic, director of macroeconomics analysis for The Conference Board, is just as optimistic as Savage about America’s economy getting back on track. Bostjancic said, “There is little hope of acceleration in the pace of job growth anytime soon. These conditions are likely to persist at least through the summer and possibly longer.”

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APMEX End of Week Report 6/29/2012

Silver Undervalued and Golden Haven:

Precious Metals closed out the week on a positive note rebounding from losses Thursday.  Precious Metals prices have been following the global economic situation and the movement of the American dollar.  The dollar weakened against the euro on news of a European plan to lower eurozone member nations’ borrowing costs.  Economist Vishnu Varathan said, “It still falls short of a concrete solution, but the removal of severe pessimism over what’s going to come out of the EU summit is driving markets higher.” Meanwhile, the news has led analyst Lynette Tan to offer a positive year end outlook for Gold. She said, “In the long run, we’re still bullish on Gold. It’s still likely to hit last year’s high of $1,920. The global economy is not doing well, and we expect safe haven demand to be back for Gold.”  There is speculation that Silver is undervalued at current levels and about what actually is driving the price. Julian Phillips at silverforecaster.com said, “With the monetary stresses now and for the next few years at current levels, there is little reason why prices should fall. Gold will react more and more as a monetary metal and the Silver prices will move with it, not with economic conditions.”

European House in order?:

Eurozone leaders came together this week and hammered out a surprising compromise plan to help member nations. There are still issues to be worked out, but going from “no hope” to at least a road map of a plan on which everyone agrees was a boost to global markets. The biggest shock of all is Germany’s agreement to a majority of the provisions. Banker Holger Schmieding said, “The summit result offers no ‘silver bullet’ to solve the euro crisis once and for all. … It is another attempt to buy some extra time for the underlying fiscal repair and structural reforms to show results.  All in all, there is some progress.” However, strategist Charles Diebel stated what many investors are probably thinking: “It is one step on a very long road.  But we don’t have any details, and arguably the detail is where the risk lies, because the market will start to pick holes in it, as we’ve seen previously.”  Crude oil and Gold prices began to climb after European Union leaders announced a strategy to have a single financial director for the region. The European Central Bank will step into this supervisory role for banks in the eurozone. This approach should help calm the markets. In some bearish news affecting crude oil, Saudi Arabia is planning to resume an oil pipeline project that has been on hold for a reported two decades, which should relieve some concerns involving the Strait of Hormuz.

Health Care & Jobs:

The “individual mandate” portion of President Barack Obama’s health care reform act has been upheld as constitutional in Thursday’s 5 to 4 Supreme Court ruling. This ruling comes just months before the presidential election, and Republicans are vowing to push for a repeal of the bill. While the long term effect of this ruling is not clear, it will be interesting to see how this affects the broader economy going forward.  This past week showed little improvement in the American labor market, as applications for unemployment benefits approached a high for the year. Concerns over the eurozone debt crisis and the potential end of the Bush era tax cuts have many employers running lean in terms of their headcounts. “There is no progress,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. “There is clearly an underlying weakness that is troubling. The labor market is sputtering along, struggling to create jobs. The pace of consumer spending will slow in the second quarter.”  United States consumer sentiment for June fell to its lowest level since December. Americans’ attitude toward the economy isn’t necessarily optimistic now, especially from the viewpoint of those in households with incomes of more than $75,000. Richard Curtin, a survey director, said, “Since these households account for a large share of total spending, if the declines continue in the months ahead, it could have a substantial impact on total spending.”

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