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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Jobs report pushes precious metals prices upward; Russia stockpiles Gold

English: Gold reserves per capita.

English: Gold reserves per capita. (Photo credit: Wikipedia)

Disappointing data from the monthly United States jobs report is the latest news to cause concern over the American economy and prompt a spike in Precious Metals prices. The continued lack of stronger economic statistics is propelling the anticipation of further monetary easing by the Federal Reserve. Economist Mark Zandi described the sentiment of the individual worker, stating, “They (workers) are still feeling pretty awful. They recognize that we’ve made progress, that we’ve gone from losing a boatload of jobs to seeing some growth, but that’s very little solace in the context of an (8.1 percent) unemployment rate.”

Central banks from nations around the globe have been amassing sizable Gold reserves in recent years as a reaction to the global financial crisis. The World Gold Council recently announced that Russia has doubled its stockpile in the past five years by purchasing a half-billion dollars’ worth of Gold every month. If the Fed announces further quantitative easing and world economic leaders such as Russia continue accumulating large quantities of Gold, the price of the yellow metal is likely to continue its upward climb.

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

  • Gold, $1,738.30, Up $33.70.
  • Silver, $33.68, Up $1.01.
  • Platinum, $1,593.30, Up $5.90.
  • Palladium, $654.40, Up $6.70.
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QE3 talk pushes Gold higher

 

Gold rose to a five-month high today on quantitative easing news out of the U.S. and Europe.  James Steel of HSBC said that “it’s the avalanche of money argument” in regards to Precious Metals’ gains recently.  Andrey Kryuchenkov of VTB Capital added, “All that promise (of quantitative easing) needs to turn into concrete action.  And for Gold in the long run, it needs any sort of liquidity boost, or balance sheet expansion, and for bond yields to stay low.”

Drakon Capital’s Guy Adami believes that the quantitative easing news will send Gold to a new record price.  “I don’t think it has anything to do with fear (about fiat currencies).  It has everything to do with what’s coming down the pipe,” he told CNBC.  “Again, I’ll say, although it’s painful on the down days, and there have been a number of them, I think gold is what’s going to win,” he added. “One day we’re all going to wake up, and the price of gold is going to be a lot higher than it is now. When I say a lot higher, I mean north of $2,000.”  Whether Gold eclipses this figure is yet to be seen, but Adami is a firm believer.

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

  • Gold, $1,696.70, Up $10.60.
  • Silver, $32.38, Up $0.94.
  • Platinum, $1,570.40, Up $32.10.
  • Palladium, $642.00, Up $12.60.

APMEX’s Account Managers now have extended hours Mondays through Fridays and are here to serve you until 8 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 keeps rising, Europe in the spotlight

 

English: European Central Bank ECB Eurotower i...

English: European Central Bank ECB Eurotower in Frankfurt a.M. Germany Deutsch: Europäische Zentralbank EZB Eurotower in Frankfurt a.M. (Photo credit: Wikipedia)

 

Gold and other precious metals had big gains last week due to the U.S.A. Federal Reserve meeting and the probability of another round of monetary easing. This week has started off with the same rise in prices and monetary easing continues to be the reason. However, the location is now changed to Europe and meetings of the European Central Bank (ECB). “The ECB is evidently planning to launch a new government bond intervention program, which would inject further liquidity into the market. This should also benefit commodities due to the lack of attractive alternative investments,” analysts at Commerzbank said in a note. Some speculate these actions by the ECB could be implemented as soon as this week.

 

A few weeks ago, the ECB President Mario Draghi said they will do “whatever it takes” to keep the euro as the major currency of the region. This week will be a good indication of what exactly Mr. Draghi and his associates have in mind to do.  “Draghi certainly has to present something,” said Guillaume Menuet, economist at Citi. “A document of some sort, something of substance is what markets want to see in order to justify valuations.” One of the main issues is not a plan of action, but rather a plan that all the countries involved can agree to.

 

In the United States, there were more negative economic reports released today. The August manufacturing report was shown to have the largest drop in over three years. Economists estimated the national factory activity to have a median of 50.0 and it came in at 49.6. It shows an unforeseen contraction in the sector. U.S. construction also fell off by 0.9 percent, as with the manufacturing report, expert predicted an increase as well. Both of these reports give more talk of monetary easing by the Federal Reserve.

 

At 1:00 pm (EDT), the APMEX precious metals spot prices were:
·    Gold, $1694.40, Up $8.30.
·    Silver, $32.27, Up $0.83.
·    Platinum, $1566.50, Up $28.20.
·    Palladium, $641.00, Up $11.60.

 

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 7 p.m. (CDT)! Or call us Fridays until 5 p.m. (CDT)! 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 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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