Jobless claims disappoint, leaving door open for QE3

 

English: James Bullard, president of the Feder...

English: James Bullard, president of the Federal Reserve Bank of St. Louis (Photo credit: Wikipedia)

 

Precious Metals prices added to early gains after the release of the weekly jobless claims report. After an upward revision from last week’s numbers, the report showed increases across the board in new claims, existing claims, and the four week moving average. Jumps in the prices of Gold and Silver are most likely due to the fact that yesterday’s Federal Open Market Committee (FOMC) meeting minutes revealed that a third round of quantitative easing (QE3) was likely unless there was significant improvement in economic reports, and this report certainly does not indicate improvement.

 

In stark contrast to the minutes of the FOMC meeting released yesterday, St. Louis Federal Reserve President James Bullard said, “If we were to resume, and I think we will, 2 percent growth, maybe a bit stronger than that in the second half of the year, unemployment ticks down through the rest of the year, that’s not a great outcome but that’s a good enough outcome to keep us on hold,” regarding QE3. Bullard also said the market may be setting itself up for disappointment. He said, “Probably the best thing to talk about here is what would that action really be? I think the markets have the idea of some gigantic action. I’m not sure if the data really warrants that.”

 

The euro continues to rise against the dollar, which is supporting the Gold price’s recent moves. Chen Min of Jinrui Futures in China said, “The Fed’s tone is totally different in the minutes from previous comments, and that helped Gold break from the previous range and move into a higher price range ahead of the peak consumption season.”

 

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

 

  • Gold, $1,664.20, Up $24.90.
  • Silver, $30.50, Up $0.83.
  • Platinum, $1,543.80, Up $16.30.
  • Palladium, $637.90, Up $7.70.

 

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Investors waiting for QE3

 

The stock market is down today as American investors paused following six straight weeks of gains on the Dow Jones Industrial Average. Also, European officials exposed a supposed plan to cap European bond yields, which hindered investor confidence even as the European Central Bank insists that no decision on the matter has been made.

The dollar is trading down against the euro today. Economists and investors alike are awaiting any possible hints that the United States will embark on a third round of quantitative easing (QE3) from the minutes of the latest meeting of the Federal Open Market Committee (FOMC), set to be released Wednesday. Modestly positive data from the recent FOMC meeting point to delaying QE3. Bill Stone, chief investment strategist at PNC Asset Management Group, said, “Even though the minutes are going to reflect they are leaving the door open, the odds have fallen since then because we’ve seen improvement in some of the data.” However, Bruce Bittles, chief investment strategist at Baird, believes newfound investor confidence is potentially risky. He said, “Investor sentiment has turned more optimistic in recent weeks. This could be problematic, given that sentiment is approaching extreme optimism at a time when the seasonal headwinds begin to surface.” Investors will wait to see if these seasonal headwinds will effect Precious Metals as the traditionally slow summer months come to an end.

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

  • Gold, $1,621.60, Up $3.70.
  • Silver, $28.68, Up $0.57.
  • Platinum, $1,498.70, Up $24.60.
  • Palladium, $608.60, Up $2.00.

 

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HSBC Predicts Gold to Rally above $1900 in 2012

 

In a report just released from HSBC Bank, “Economic uncertainty, geopolitical tensions and the uncertainty of the U.S. November elections are theoretically gold-bullish, and gold should perform better later in the year when U.S. growth is poor and the dollar is weak.” The report further stated that “We expect prices to rally to above $1,900/oz by the end of the year. Patience is the most important commodity.”

Gold is up slightly in early morning trading as the U.S. dollar index hit a one month low. The positive jobs report on Friday increased the appetite for risk and therefore put downward pressure on the U.S. dollar. There is much speculation that during the September Federal Open Market Committee further monetary easing will be announced. For now, gold remains in a fairly tight trading pattern while trying to decipher the direction of the global economies.

Spain is staying in the spotlight and the question is being asked of how much bailout they will actually need. At the moment, efforts are being made to stop the bleeding, but it is uncertain whether or not they will save the patient. The credit ratings make it very difficult for institutional investors to invest in Spain. There are concerns that this could turn into the same pattern as Greece, where smaller bailouts eventually turned into a full-fledged bailout.

At 9AM EDT the APMEX precious metals prices were:

  • Gold price – $1,1610.00  – up $2.70
  • Silver price – $27.80 – down 11 cents
  • Platinum price – $1,397.00 – down $17.40
  • Palladium price – $577.60 – down $1.60

 

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Time to sound the alarm with Spain?

Precious metals have been generally even to climbing through early morning trading. Investors are wary of world events and slowly re-establishing their safe haven mentality in regards to global and domestic economic situations. The FOMC is set to release a statement tomorrow, which analysts feel are corralling prices for now. Analyst Lynette Tan said, “Ahead of the FOMC meeting, gold bugs will watch for signs of more quantitative easing or an extension of Operation Twist when it ends this month. A failure to confirm more asset purchase or the like could see gold dropping again. For the moment, we expect policy decisions from the Fed to influence gold price more than risk appetite linked to the euro crisis.”

Is it time to sound the alarm on Spain? That’s the question facing the global community, with a call for help so far falling on deaf ears, but is readily apparent in the debt sale attempts. German Chancellor Angela Merkel continues to compromise, but the firm line in the German sand is not sharing the burden with the euro bonds. Spanish Treasury Minister Cristobal Montoro has asked the ECB for its help. However, the ECB continues to put the onus of responsibility on the countries themselves. Spanish Economy Minister Luis de Guindos said, “We think … that the way markets are penalizing Spain today does not reflect the efforts we have made or the growth potential of the economy. Spain is a solvent country and a country which has a capacity to grow… I don’t think things look catastrophic for Spain as eventually some solution will have to be found, or the ECB will have to step in again. It’s in no one’s interest to see Spain bailed out, because then there will be questions as to whether there are enough funds, and questions over Italy.”

At 9:00 a.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,630.70 – Up $3.20.
  • Silver – $28.85 – Up $0.08.
  • Platinum – $1,489.30 – Up $3.20.
  • Palladium – $634.30 – Up $0.10.
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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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Gold price dips as Fed Chairman testifies

The Gold price has taken a tumble in midday trading as Federal Reserve Chairman Ben 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.”

Bernanke’s testimony to the Joint Economic Committee highlighted many of his concerns without much substance on how the central bank might act. Bernanke also warned lawmakers that “a severe tightening of fiscal policy at the beginning of next year that is built into current law — the so-called fiscal cliff — would, if allowed to occur, pose a significant threat to the recovery.” Next up will be the Federal Open Market Committee meeting June 19-20, which is expected to deal with slowing employment growth.

German Chancellor Angela Merkel has 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,” the chancellor said.  Merkel, however, has not backed off her rejection of debt sharing or access to euro bailout funds for Spanish banks.

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

  • Gold, $1,591.60, Down $40.10.
  • Silver, $28.73, Down $0.85.
  • Platinum, $1,444.20, Down $27.00.
  • Palladium, $625.00, Down $7.80.
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China rate decision boosts stocks

News out of China is driving the markets this morning, as the central bank in the country cut interest rates by 25 basis points.  Jordan Lambert of Spreadex Ltd. said “The unscheduled rate announcement by the Chinese central bank has been long awaited and has satisfied the growing expectations of a rate cut by a major economy … It is also worth being mindful that sometimes such interest rate moves are coordinated with other central banks therefore there could be further surprises to the upside.”

Also in focus today will be Federal Reserve Chairman Ben Bernanke’s testimony to the Joint Economic Committee.  Bernanke always seems to move the markets when he speaks, and today may be no different.  Another top Fed official, Janet Yellen, is not closing the door on a third round of quantitative easing.  “I am convinced that scope remains for the (Federal Open Market Committee) to provide further policy accommodation,” Yellen said.  She said that jobs numbers lately have been “pretty disappointing,” and that, among other topics, could be reason for further intervention.

This week’s jobless claims report showed a drop of 12,000 new claims, which is better than expected.  However, numbers from two weeks ago were revised upwards by 6,000, and continuing claims rose by 34,000.  Precious Metals prices and stock prices seemed to take this in stride, continuing to be more influenced by the Chinese rate cut.

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

  • Gold – $1,623.20 – Down $10.50.
  • Silver – $29.54 – Down $0.04.
  • Platinum – $1,467.50 – Down $1,467.50.
  • Palladium – $628.50 – Down $4.30.
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