Tag Archives: Federal Reserve System

Weekly Gold and Silver Market Recap for Dec. 21, 2012

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Gold drops will fiscal cliff news

The Gold market has seen better weeks this year. The indecisiveness of the United States congress over the impending fiscal cliff has taken the precious metal market on a ride. As of mid-day on Tuesday, Gold has fallen more than $20 an ounce at mid-day. Today’s dip comes as investors eye positive developments in fiscal cliff negotiations. Julian Phillips, founder of GoldForecaster.com, believes the sudden optimism over discussions in Washington is premature by stating, “Small steps toward an agreement are [supposedly] being made in Washington, but we prefer to act on a deal, not the expectation of one.” Many analysts are still bullish on the long-term appeal of Gold. Concerning today’s price pullback, one analyst stated, “Gold is on sale and should be seriously looked at below $1,700.” It appeared that politicians are close to reaching a deal to avoid the fiscal cliff at the end of the month. “If Gold is not able to defend those key supports, one should expect a new wave of technical selling to continue,” said Adam Sarhan, chief executive of Sarhan Capital. At 2 percent down, the yellow metal saw one of the biggest drops since November 2. By the middle of the week optimism over a fiscal cliff deal started to fade and gold fell flat. The back-and-forth sentiment regarding fiscal cliff aversion leaned negatively today after Tuesday saw positive reports, which prompted a major sell-off. Gold has gained 7 percent in 2012 as central banks around the world continue to be net buyers of the metal. However, investors remain concerned over market stability, and interest rates remain close to zero. Economists, financial analysts and individual investors continue to speculate about Gold’s future as the fiscal cliff draws near. As of Friday the market started to get back some of the lost ground from the week but it won’t get back all of it. This week looks to be the worst since June for Gold, though it is still on track for yet another annual gain. Brian Lan of GoldSilver Central in Singapore said, “At the moment, the U.S. budget talks are stalling. Many are unsure if they should enter the market. Perhaps when the U.S. has more concrete news on the outcome, investors will be more comfortable taking positions again. The market volume is thin amidst all these uncertainties, and the year is coming to an end. Many of the investors prefer to take profits and just leave the market.”

It’s not all about the cliff

This week has been a repeat of last week when it comes to the news reports in the United States. There has been much talk about dealing with the fiscal cliff but, not any action as of Friday. Away from the talks in congress the world keeps going and it is not all so negative. Americans are trying to focus on the good news rather than the bad as an upcoming fiscal cliff resolution looks uncertain. Consumer spending in November increased as household purchases rose 0.4 percent. As the unemployment rate has improved and jobs are becoming more stable, Americans feel the economy is more secure. “The numbers are encouraging,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “There’s business that has to get done whether or not these guys iron out this thing in Washington in a timely fashion. We’re going to start the year off slowly and gradually build momentum” because there will probably be a last-minute deal, he said. Mild indications that the U.S. economy is improving have softened expectations that the Federal Reserve will increase its liberal spending. “The GDP number was better than forecast, so the thinking is that improving conditions in the economy might mean a light at the end of the tunnel on when the Fed will end QE3,” said Phil Streible, a senior commodity broker at R.J. O’Brien & Associates. With all the negatives surrounding the fiscal cliff there are still positives to be found.

 

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

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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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Stocks Still Gaining After QE3; Gold Outlook Positive

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Global markets continue to rally today following Thursday’s announcement of the United States’ aggressive bond-buying plan. News of the program lifted the S&P 500 to its highest single day peak since January 2, 2008. The market reaction is not unexpected. Investors will await the long-term effects of the latest round of quantitative easing (QE3) as the Federal Reserve announced it will inject $40 billion dollars a month into the U.S. economy until the jobs market realizes prolonged growth.

Bullish investors are still impeded by one final obstacle as Spanish Prime Minister Mariano Rajoy continues to delay acceptance of the European Central Bank’s stimulus package which was announced last week. Economists continue to assert that a bailout is inevitable and necessary for the country which currently renders one out of four workers jobless. Rajoy “needs to bite the bullet on aid while the going is relatively good,” Derks said, in a note. “The current market calm is merely a facade created by a fortuitous alignment of various forces. Better to get pen to paper now, rather than be forced kicking and screaming in a few months time.”

As expected, the announcement of QE3 caused a significant spike in the gold price on Thursday. Though it has traded relatively flat today, analysts predict continued upward movement for the metal as the Fed gears up to indefinitely pump funds into the struggling U.S. economy. “You’ve got gold, a fixed quantity, and central banks printing more money. Ergo, gold becomes more expensive,” Richard Cookson, global chief investment officer at Citi Private Bank, told CNBC Friday. “The cost of holding gold is zip, because interest rates are effectively zero. So you print more currency, and the gold price goes up because you price in that extra currency.”

At 1:00 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,773.90, Up $2.80.
  • Silver, $34.71, Down $0.08.
  • Platinum, $1,714.60, Up $34.10.
  • Palladium, $701.20, Up $12.20.

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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QE3 decision coming at 12:30 P.M. EDT

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Gold and Silver prices are mostly flat this morning as investors await a Federal Reserve monetary policy decision.  Fed Chairman Ben Bernanke is scheduled for a press conference at 2:15 p.m. (EDT), though the policy decision should be out closer to 12:30 p.m. (EDT).  David Morrison of GFT Markets believes that the markets have “priced in significant action from the (Fed).  The expectation is for a further round of large-scale asset purchases similar to 2010’s $600 billion QE2 program.” He continued, “The language accompanying another round of quantitative easing will be all-important” because if the Fed decides to wait, the markets could be in for disappointment.

Prices remained stable after the weekly jobless claims report was released.  Claims rose by 15,000 last week, about 12,000 more than expected.  Guy Berger of RBS Securities, Inc. said, “The labor market continues to be disappointing.  We’d like to see the hiring side pick up.  Companies are very cautious given all the uncertainty.”

One of the countries hit hardest by the eurozone debt crisis is Spain, which boasts the third-largest economy in the eurozone.  Spain’s prime minister Mariano Rajoy suggested to parliament yesterday that Spain may not need to ask for a bailout due to the success of the European Central Bank’s bond-buying program.  Many experts believe a bailout will be necessary eventually, however, and the delay in asking for one could prove to make things worse by way of conditions for receiving bailout funds.  Goldman Sachs analysts wrote, “The more the Spanish administration indulges domestic political interests and is perceived to be taking undue advantage of external support, the more explicit conditionality is likely to be demanded.”

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

  • Gold, $1,734.40, Up $1.70.
  • Silver, $33.21, Down $0.09.
  • Platinum, $1,661.40, Up $10.80.
  • Palladium, $684.60, Up $5.30.

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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Stocks report mild gains in anticipation of QE3

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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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