Weekly Gold & Silver Market Recap for March 22nd, 2013

GOLD PRICES REACT TO CYPRUS BAILOUT

The tiny European island nation of Cyprus dominated many of the financial headlines this week, and as of today there has been no resolution to the country’s financial crisis. Cyprus is in the midst of a financial collapse and is in dire need of aid from larger international banks. The European Union has stepped up and is willing to assist in financing a bailout plan. However, the EU is requiring that Cyprus pay back part of the loan with a tax on bank deposits. Ilya Spivak, currency strategist at DailyFX said the Cyprus bailout plan “has pushed the euro sharply lower at the start of the trading week amid rising fears of mass capital flight.” He continues on to say that investors across the zone could scramble to move their capital out of the region. The easing proposal was met with much resistance by the government of Cyprus. “At this point in time, we are saying [to international lenders] that if you think that by doing this you are fixing things, by actually destroying our economy and one of the biggest and strongest financial sectors we had on this island, then we have to say ‘no’,” said Efi Xanthou, international relations secretary of the Cyprus Green Party. As of today Cypriot lawmakers are voting today on bills that would strike a deal with European partners after talks with Russia fell apart. The controversial tax on bank deposits is the key issue that parliament will debate. Banks in Cyprus reopen on Tuesday, and there is a real concern that capital will begin to flow out of the beleaguered country. The European Union issued the Cypriot parliament an ultimatum saying they need to raise 5.8 billion euros by Monday to receive their bailout package. Without the deal, Cypriot banks will be cut off from the liquidity of the European Central Bank. Bill Blain, senior fixed income broker at Mint Partners, said “Cyprus could be let go if they don’t come up with a robust enough package. If they come up with something half-baked, that will be rejected and they will be let go. If they come up with something that clearly cuts higher deposits and puts money back into the banks and go about bank restructuring, that may work.” The Gold price has been rising as the trouble in Cyprus unfolds. Safe haven buying prompted investors to push the Precious Metal to as high as $1,616.36 an ounce in overnight trading. When priced against the euro, Gold is up 2.6 percent so far this week.

UNITED STATES FEDERAL RESERVE NOTES

On Tuesday the latest policy meeting of the Federal Open Market Committee began. HSBC said in a note, “(We) expect the FOMC to reaffirm its commitment to the current quantitative easing policy and to offer no hint that it will alter the policy in the near term … Uncertainties surrounding the potential withdraw of QE contributed to Gold’s sell-off earlier this year. Given this, clarity on the FOMC’s QE exit strategy may help ease such concerns and lend support to Gold.” Federal Reserve Chairman Ben Bernanke promised to uphold the Fed’s $85 billion in monthly bond purchases on Wednesday. Few are surprised by the Fed’s announcement as the current unemployment rate of 7.7 percent is still far from the 6.5 percent target. Bernanke has committed to maintain the current stimulus program until the U.S. jobless rate has reached the desired target. Some Federal Reserve officials have been open critics of the need for a continuation of such aggressive monetary policy, but the majority of members still see the current easing measures as necessary to impel U.S. economic recovery. Bernanke noted that a scale down of the quantitative easing (QE) program is far from imminent as officials predict desired levels of unemployment will not be reached until at least 2015. On Thursday morning the United States jobless claims report was released. While the claims did move up, the move was not as much as anticipated. Analysts had expected a rise of about 10,000 claims; in reality it was closer to 2,000 claims. This report lends cause for the U.S. Federal Reserve to keep pushing forward with its monetary easing plans. “Gold is positively reacting to the Fed saying that quantitative easing will not end any time soon and there is also uncertainty of what is going on in Cyprus,” Saxo Bank senior manager Ole Hansen said. Gold has reacted positively when easing is in play and today is no different.

At 4:00 p.m. (EDT), the APMEX Precious Metals spot prices were:

Gold, $1,610.10, Down $6.20.
Silver, $28.79, Down $0.50.
Platinum, $1,585.70, Up $3.60.
Palladium, $759.50, Up $3.60.

Stocks report mild gains in anticipation of QE3

 

U.S. stocks are reporting modest gains today as investors are guarded in anticipation of potential quantitative easing (QE3). Thursday will conclude a two day session of the Federal Open Market Committee (FOMC) after which many analysts foresee Federal Reserve Chairman Ben Bernanke potentially announcing further government stimulus. Economists are expecting the announcement following 43 consecutive months of unemployment above 8% and an economy that grew less than 2% in the second quarter of 2012. A poll of economists who put the chances of QE3 above 50% resulted in 39 out of 51 predicting action on the part of the Fed during this week. “Monetary stimulus will ‘shore up’ a fundamentally weak economy, as opposed to helping the U.S. economy attain a significantly faster underlying rate of growth,” said John Lonski, economist at Moody’s Investors Service.

Gold futures are also realizing humble gains as a German court ruling has allowed Berlin to ratify a final euro zone rescue fund along with news from the FOMC. “With the market’s main focus on this week’s [Fed] meeting…prices were buoyed by a stronger euro,” said strategists at HSBC. The next 24 hours could prove to be eventful for precious metals markets.

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

  • Gold, $1,732.30, Down $1.60.
  • Silver, $33.12, Down $0.46.
  • Platinum, $1,649.20, Up $41.20.
  • Palladium, $679.10, Up $4.30.

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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Analyst: Time for QE3

Modern-day meeting of the Federal Open Market ...

Modern-day meeting of the Federal Open Market Committee at the Eccles Building, Washington, D.C. (Photo credit: Wikipedia)

Precious Metals are trading higher this morning in anticipation of the Federal Reserve meeting tomorrow.  After last week’s dismal jobs report, analysts believe the time is now for the Fed to act.  Mike Dueker of Russell Investments wrote, “If many (Federal Open Market Committee) members meant what they said about needing to see ‘substantial and sustainable strengthening in the pace of the economic recover’ in order not to implement a third around of quantitative easing, then it is time to act.

Germany’s Federal Constitutional Court blocked requests for an injunction which would rule German support of the eurozone rescue fund unconstitutional.  German Chancellor Angela Merkel said that the ruling sends “yet another strong signal to Europe and beyond: Germany is accepting its responsibility as the largest economy and reliable partner in Europe.”

The Platinum price is gaining at a much greater pace than other metals today due to the unrest in South Africa.  The top Platinum producer in the world, Anglo American Platinum, is now being affected by striking miners, who blockaded roads leading to shafts.  “Fear of intimidation and threats by unidentified individuals in and around” certain locations caused some non-striking miners to be unable to report for work, according to a statement.

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

  • Gold – $1,738.90 – Up $5.00.
  • Silver – $33.71 – Up $0.15.
  • Platinum – $1,646.10 – Up $38.10.
  • Palladium – $679.50 – 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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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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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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Gold, Silver flat as Jackson Hole speech looms

Jackson Hole, WY

Jackson Hole, WY (Photo credit: mf.lane)

Gold and Silver prices are mostly flat this morning ahead of the Jackson Hole Economic Symposium to be held later this week.  Though European Central Bank President Mario Draghi has bowed out of the event, all eyes are still on the Federal Reserve and whether chairman Ben Bernanke will announce another round of quantitative easing.  Scott Anderson of Bank of the West said that the Fed has been “like a diver eyeing the pool from the edge of the diving board, but can’t seem to get themselves to move.”

The “will they or won’t they” game that the Fed has been playing in regards to quantitative easing has pushed and pulled the Gold price to highs not seen since Spring.  Many investors are expecting Bernanke to announce such a plan during his speech at Jackson Hole on Friday.  However, there is another Federal Open Market Committee meeting September 12-13 that may serve as the podium for the official announcement.  Danske Bank analyst Christen Tuxen said, “We think that we will see a fairly dovish Bernanke on Friday and that he will commit, if not at Jackson Hole then at the September FOMC meeting, to deliver more easing to the market.”

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

  • Gold, $1,667.10, Down $1.10.
  • Silver, $30.93, Down $0.04.
  • Platinum, $1,520.00, Down $1.40.
  • Palladium, $635.20, Down $6.00.

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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Gold slightly lower; market still analyzing FOMC minutes

 

American stock futures and Gold are slightly lower this morning as investors continue to analyze the latest Federal Open Market Committee minutes. The top story hasn’t changed; all eyes are firmly on a small town in Wyoming. “Given all the mixed messages, the Jackson Hole symposium next Friday is building up to be a key event as we look forward to the latest download from the chairman himself,” said James Reid of Deutsche Bank.

Yesterday, the St. Louis Federal Reserve president said that more easing may be unnecessary. Today, one of the longtime supporters of further quantitative easing by the Fed, Chicago Fed President Charles Evans, stated his view on the matter. “The outlook for growth is 2 percent, if we are lucky 2.5 percent, over the next 18 months to two years. Back in the spring, we thought it was going to be 2 1/2, 3 percent. … We stepped down our outlook; unemployment is 8.3 percent; there’s a lot of reason to do more,” he said.

Though the Gold price has come off the recent rally this morning, Pradeep Unni of Richcomm Global Services said that it likely won’t last long. “Having got the necessary signals from the Fed for QE3, the market is just waiting for a confirmation to spike higher,” he said. “Any consecutive release of weaker than expected economic data will only add fuel to the fire.”

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

  • Gold, $1,668.90, Down $2.40.
  • Silver, $30.58, Up $0.04.
  • Platinum, $1,542.00, Down $13.90.
  • Palladium, $644.80, Down $13.30.

APMEX’s Account Managers now have extended hours and are here to serve you until 8 p.m. (EDT) Mondays through Fridays! If you have any questions about investing in Precious Metals or would simply prefer to place your order by telephone, we are here to help.

 

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