Gold gains momentum & Spanish Yields

Gold continues to march in positive territory during today’s mid-day trading and appears to be gathering momentum. The euro gained ground relative to the dollar and other commodities (copper) are seeing their prices moving up as well. “(We had) a small pop higher in the euro and that was it,” Saxo Bank vice president Ole Hansen said. “The market wants to go higher now and it has taken comfort from the fact that buyers returned fairly quickly after the sell-off last week.”

The U.S.A. stock market is holding on to some gains today while absorbing the impact of Spanish bond yields hitting historic highs. There is still concern over Spanish debt levels and questions about the bank rescue deal. “Into their close, both Spanish and Italian bonds are bouncing off their (price) lows. The daily egg shells we walk on this week over Spain will of course be followed by Sunday’s election in Greece and what, if anything, the FOMC (Federal Open Market Committee) will announce next week,” said Peter Boockvar, at Miller Tabak & Co. The coming election in Greece is being viewed as a major factor in its status in the Eurozone.

At 1:00 p.m. (EDT) – the APMEX precious metals spot prices were:

  • Gold – $1,612.90 – Up $16.10.
  • Silver – $28.96 – Up $0.26.
  • Platinum – $1,454.50 – Up $3.20.
  • Palladium – $623.20 –Down $2.00.
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APMEX End of Week Report for 6/8/2012

Bernanke Speaks:

Official portrait of Federal Reserve Chairman ...

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

Gold has had ups and downs this week. The market has many investors questioning the long term outlook for Precious Metals.  As with all investments, there will be unknown factors.  At present, there is the European economic crisis, the Chinese economic slowdown, and underachieved goals for a better American economy. With these situations being in play, it could signal good news for investors. Dennis Gartman, author of The Gartman Letter, said, “The trend for Gold is still from the lower left to the upper right. I think that you want to own Gold in dollar terms; I think you want to own Gold in euro terms; I think you need to own Gold in yen terms. And quite honestly at this point, given the economic circumstances, I think you’d like to be long of gold and short the stock market.”  There was a lot of cautious optimism bubbling ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress this week.   Global strategist Dan Greenhaus said, “There’s just been, for the last 48, 72 hours, a growing feeling that a 10 percent decline in the stock market is as deep a decline as you would get with Ben Bernanke lurking tomorrow.” He also added, “The fate of the market in the next couple of days is in Ben Bernanke’s hands, and it’s over his interpretation of the state of the economy.”  That interpretation wasn’t as clear as some would hope, as Chairman Bernanke refused to tip his hat regarding any new stimulus package.  Bernanke indicated that while the central bank is willing to protect the economy from “worsening,” he did not specify what actions (if any) the Fed would take. “The Gold bulls are desperately hoping for further mention of some form of stimulus from the Fed,” said David Govett of Marex Spectron. “If some form of this is put on the table, then I expect Gold will react very positively. If however, as I personally believe, the Fed leaves things as they are for the time being, this will be viewed as negative and Gold will fall.”

Spanish Debt Downgrade:

MADRID, SPAIN - MARCH 30:  Spain's Minister of...

MADRID, SPAIN – MARCH 30: Spain’s Minister of Treasury and Civil Services Cristobal Montoro Romero unviels Spain’s budget for 2012, during a press conference at the Moncloa Palace on March 30, 2012 in Madrid, Spain. The budget for 2012, which comes in the wake of a 24-hour general strike, includes over 27 bn euros in savings. (Image credit: Getty Images via @daylife)

At the G-7 conference this week, Spain’s Treasury Minister Cristobal Montoro sounded the alarm about how bad the banking situation is in Spain at this time. As the debt gets worse the access to credit to help bail themselves out is becoming more and more detrimental. He even called for European assistance, a departure from what other government officials had wanted, which was to raise the funds itself.  In an interview Montoro said, “The risk premium says Spain doesn’t have the market door open. The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.” That problem grew later in the week when ratings agency Fitch downgraded Spanish debt from A to BBB on concerns that the country will need a bailout package to avoid economic disaster. Furthermore, Fitch’s outlook is negative, which means that more downgrades are likely.  German Chancellor Angela Merkel reacted by reiterating Germany’s commitment to helping its weaker eurozone partners. “It is important to stress again that we have created the instruments for support in the eurozone and that Germany is ready to use these instruments whenever it may prove necessary,” she said.

Germany Holding the Reigns:

Germany appears to be willing to trade a greater role supporting its indebted EU partners for more centralized control over government spending in member nations. While

Deutsch: Dr. Angela Merkel Bundeskanzlerin der...

Deutsch: Dr. Angela Merkel Bundeskanzlerin der Bundesrepublik Deutschland Vorsitzende der CDU Deutschlands (Photo credit: Wikipedia)

continuing to stay away from the idea of “eurobonds,” there is growing interest in pooling the bad debt with a payoff timetable of 25 years. “The world wants to know how we expect the political union to complement the currency union,” German Chancellor Angela Merkel said. “We have to find an answer in the foreseeable future.” In comments later this week Chancellor Angela Merkel said that Germany will use all the tools it has available to support the 17-nation eurozone. “In view of the current difficulties, it’s important to emphasize that we have created the instruments of support in the eurozone, that Germany is ready to work with these instruments whenever that is necessary, and that this is an expression of our firm desire to keep the euro area stable.”  Merkel, however, has not backed off her rejection of debt sharing or access to euro bailout funds for Spanish banks.

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Weekly Gold and Silver Market Recap for May 25, 2012

by John Foster. Email John.

Golden Range?:

Concerns out of the Euro zone continued to pull down the euro and strengthen the American dollar this week, thus pulling down prices. Gold in particular has remained relatively fluid within a certain price range of $1,530 to $1,590. However a key price indicator in the short term continues to be $1,600 an ounce. However, euro pressure continues to be in the driver’s seat for prices. An unidentified international dealer said, “If we break above $1,600 and even go higher to confirm the bull trend, we will see more buying.”  Gold’s price drop has been well documented during the past few weeks. Many factors have led to the shift in price. However, in the view of many investors, this is an opportunity, based on a closer look at the numbers. CNBC contributor Dennis Gartman said, “The public is massively bearish, and that tells me it’s time to be bullish.” He added, “Most people don’t think Gold and stocks can go higher together, but I expect to see them trade dramatically higher over the course of the next several months. The trend is now higher.”  Prices of Precious Metals were boosted by news of purchases from the biggest of spenders. Central banks in Turkey, Ukraine, Mexico, and Kazakhstan increased their Gold holdings in April, according to the International Monetary Fund. Commerzbank AG said, “We regard the central banks as a stabilizing element on the Gold market and anticipate increasing buying of Gold.” Lachlan Shaw of Commonwealth Bank of Australia said that early signs of an American recovery, a slowdown in Chinese growth, question marks over United States monetary policy and a sovereign debt crisis brewing in Europe are all keeping the market in a wait and see mode. “Any of these four catalysts can drive prices and investment demand,” he said.

U.S Slow but Steady?:

The United States might experience slower economic growth than previously expected with the end of extended benefits for the unemployed. This might influence some job seekers to accept jobs they otherwise would prefer not to, or give up searching for a job and drop out of the labor force. Andrew Tilton at Goldman Sachs Group Inc. is optimistic about the end of the extended benefits program. He said, “There has been an improvement in the availability of jobs. In a better labor market, people losing their benefits would be more likely to look and to find a job, and less likely to simply drop out.  However, consumer sentiment in the United States rose to its highest point in more than four years in May. Optimism in the air as a healthier economy is beginning to develop. Richard Curtin, head of the University of Michigan’s consumer survey, reflected on how long the consumer sentiment will remain positive. He said, “The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made.” Despite the upheaval in Europe, the United States’ economy continues to push forward. There is concern the debt problems in Europe and China could affect American factory data soon, with the Purchasing Managers Index slowing from 56.0 in April to 53.9 this month. Paul Edelstein said, “We are growing at moderate pace of two to two-and-a-quarter percent, but we have some headwinds that are starting to assert themselves, particularly coming from Europe.” Continue reading

Precious metals jostled by currencies

Precious metals have been relatively volatile throughout the day, but ultimately settling higher for the day bringing an end to a downward trend over the last few days. The U.S. dollar was down earlier in the day but rallied through the afternoon. There was also some technical maneuverings ahead of a change in futures contracts. Eurozone fears still continue to fester as an EU summit voiced support for Greece to remain in the eurozone, but not offering anything substantial in terms of a plan to make that happen.

Eurozone citizens, by and large, are still supportive of Greece remaining in the eurozone despite the looming fear that they may be forced to exit. Support for remaining in the eurozone is strongest in Greece and lowest in Germany and Italy. However, support is still well above 50% for Greece to remain in the eurozone. According to John Wright, “Regardless of the turmoil and the debate that’s going on in these crucial countries, it would seem that for the time being, people want to stick with the euro… Maybe it’s an issue of ‘if one goes down, we all go down together’, but nevertheless, given the options, the public in these crucial countries seem to be on side. People aren’t willing to abandon it – not yet.” Meanwhile, the Syriza party continues to build momentum ahead of Greek elections. The Syriza party is anti-austerity and headed by Alexis Tsipras.

Despite the upheaval in Europe the United States’ economy continues to push forward. The debt problems in Europe and China could start impacting American factory data pretty quickly, with the Purchasing Managers Index falling from 56.0 in April to 53.9 this month. Paul Edelstein said, “We are growing at moderate pace of two to two-and-a-quarter percent, but we have some headwinds that are starting to assert themselves, particularly coming from Europe.”

At 5:00 p.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,560.20 – Up $10.30.
  • Silver – $28.36 – Up $0.76.
  • Platinum – $1,421.60 – Up $5.50.
  • Palladium – $588.40 – Down $4.70.
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Gold & Silver Prices Slightly Off in Morning Trades

Markets continue to monitor news coming out of the euro zone. Greece wants a new deal with less austerity, but there are no signs Germany is willing to give in. Of course, Greece is not the only problem. Investors will watch Spanish banks for any signs of additional weakness. There are those who are concerned there could be runs on the banks.

Euro zone leaders will meet informally in Brussels this week and French President Francois Hollande is expected to propose the idea of a Eurobond. A Eurobond would be jointly underwritten by all euro zone members. Germany is reluctant to support such a measure until other member states have their financial houses more in order. If these bonds were to written, it would place Germany in a position of financing the debt of other states.

The leaders of the G-8 met over the weekend at Camp David. They all agree that Greece should stay in the euro zone and they all agree “on the importance of a strong and cohesive euro zone for global stability and recovery.”

The continued uncertainty in Greece has caused the euro to give up the small gains it had achieved against the dollar. This largely accounts for the weak openings for gold and silver.

At 9AM EST the APMEX precious metal prices were:

  • Gold price – $1,589.20 – down $4.20
  • Silver price – $28.31 – down 48 cents
  • Platinum price – $1,461.80 – up 50 cents
  • Palladium price – $613.30 – $7.70
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