European summit not looking good; dollar rising

Precious metals prices are weathering the blows of investors concerns over the eurozone debt crisis. The concerns ahead of the European Union summit, has influenced investors and even world markets. The rupee continues to struggle, which has curbed the primary gold-investing nation of India’s normal buying. Analyst Robin Bahr said, “There’s no semblance of a safe-haven at the moment but as the price goes lower that bid does come back as you maybe get some renewed investor interest – sovereign wealth funds and central banks looking to nibble away and even some physical buying.”

The concerns now are growing, as concerns over Germany’s own economic issues mount. As executive and consumer sentiment fell from 90.5 in May to 89.9, the lowest for Germany since late 2009 and unemployment is on the rise. The issue is that now core member nations, not just secondary nations, are affected by the growing debt crisis. Economist Christoph Weil said, “Germany won’t be able to disconnect from the euro-region developments… The second quarter will show an economic contraction and there are no signs of improvement for the following three months. Whether the situation stabilizes afterward hinges decisively on the euro crisis and latest developments are no real reason for optimism.”

The pressure continues to build for German Chancellor Angela Merkel within the European Union as she continues to be attacked on all sides from nations that find her intransigence off-putting. However, it is not just her partner nations, but she is even pressured globally. The issue is that as unpopular as her beliefs are in the EU, they are quite popular with the German people. Billionaire George Soros feels her position is a bit myopic. He said, “Merkel has realized that the euro is not working, but she cannot change the narrative she has created because that narrative has caught the imagination of the German public, and the German public has accepted it.”

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

  • Gold – $1,570.10 – Down $9.90.
  • Silver – $26.96 – Down $0.11.
  • Platinum – $1,402.30 – Down $9.50.
  • Palladium – $577.00 – Down $3.80.
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Precious metals under pressure; Euro keeps falling

Gold is continuing its downward trend during midday trading, as the euro continues to fall and a resolution to the problems in Spain and Greece remains unseen. “Gold looks fragile at the moment,” BNP Paribas analyst Anne-Laure Tremblay said. “It could rebound if U.S. durable goods orders disappoint tomorrow, as the market would then anticipate a greater probability of the Fed easing.” American consumer confidence and outlook data have both hit lows for the year.

The European stock market closed lower on concerns over waning American consumer confidence and lackluster interest in a recent Spanish debt auction. The European Union is also coming under fire from Germany for focusing too much on plans that include debt sharing. “Stocks have ended in a soft manner today, with clients holding back from taking on risk ahead of the EU summit later this week,” wrote Ishaq Siddiqi, a market strategist at ETX Capital in London. “Worries that leaders are set to disappoint continue to grow, as Germany refrains from its stance on euro bonds.”

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

  • Gold, $1,574.10, Down $15.80.
  • Silver, $27.11, Down $0.54.
  • Platinum, $1,432.50, Down $8.70.
  • Palladium, $594.10, Down $14.20.
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Eurozone worries mount; precious metals on the move

Early morning precious metals prices have been fairly volatile on eurozone debt fears and the escalation of violence and rhetoric involving Syria. Analyst Robin Bhar said, “Gold is capped on the upside by disappointment post-Fed, while on the downside, we have some bargain hunting, and a bit of physical buying into the troughs… We are stuck in a fairly small range here, in the 1570-1600 area, certainly until the weekend when we will get to hear more on how the euro zone will be (tackled).”

The eurozone debt issues continue to escalate after the announcement of a fifth eurozone nation applying for aid. Although Cyprus, the fifth nation seeking aid, is a much smaller “hit”, the combined impact of rising Italian and Spanish yields, Greek resolution, and monetary bailout has European leadership at a crucial crossroads. A summit has been put together to overcome some hurdles the European Union is now facing. Basically the whole of Europe is interested in a single treasury and euro bond, except Germany, but Germany is, at this point, the only truly solvent nation and facing their own issues in being the benchmark, if you will, as production and consumer sentiment in Germany has slid over the last couple of months. Chairman Jim O’Neill said, “The euro crisis is in some ways mind-bogglingly simple to solve … because it isn’t economics, it’s politics… If Angela Merkel and her colleagues stood there together with the rest of the euro area … and if they behaved as a true union this crisis would be finished this weekend.”

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

  • Gold – $1,579.80 – Down $9.10.
  • Silver – $27.30 – Down $0.33.
  • Platinum – $1,436.10 – Down $5.30.
  • Palladium – $602.50 – Down $5.80.
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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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Gold price takes a dive

The Gold price took a dive today after Federal Reserve Chairman Benjamin Bernanke gave no indication of further monetary easing by the Fed. Bernanke testified before the Joint Economic Committee today. He pressed Congress to pass legislation to avoid the “fiscal cliff” coming at the end of the year, when automatic spending cuts will kick in and tax cuts will expire. “That being said, there’s strong support (for Gold) at the $1,600 level, as generally the market feels that QE3 or more accommodation is just a matter of when and not if,” said Tom Essaye, editor of the 7:00’s Report.

Ratings agency Fitch downgraded Spanish debt to BBB from A today 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.

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

  • Gold, $1,589.70, Down $44.00.
  • Silver, $28.64, Down $0.94.
  • Platinum, $1,441.40, Down $29.80.
  • Palladium, $623.10, Down $9.70.
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Credit Dries Up for Spanish Banks

Spain may be required to accept a bailout soon as the country’s Treasury Minister told Spanish radio listeners today that it’s “technically impossible” for Spain to bail itself out. Spanish banks are suffering from an overload of debt from the country’s bursting housing bubble that was fueled by cheap interest rates after Spain joined the eurozone. Bond yields on Spanish sovereign debt have tipped near the 7% mark that signals markets are anticipating a default, and have been trading at 5.48% premium to safe-haven German bonds, indicating reluctance to loan the government more and more money. Spain will attempt to issue $2 billion more euros in debt on Thursday, which will be a test of market sentiment.

Famed hedge fund manager George Soros estimates Europe has three months to address the crisis. “The heavily indebted countries need relief on their financing costs. There are various ways to provide it but they all need the active support of the Bundesbank and the German government,” Soros said. “Nothing can be done without German support.” While he does not expect a full-blown collapse of the euro, Soros expects Germany’s economy to weaken and the resolve of German citizens to soften to the point that they will be increasingly resistant to assist with further bailouts. Soros, a noted gold bug, rose to fame in the early 1990’s by betting against the British pound, earning him the title, “The Man Who Broke the Bank of England.”

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

  • Gold, $1,617.60, Up $4.20.
  • Silver, $28.57, Up $0.48.
  • Platinum, $1,437.20, Up $7.90.
  • Palladium, $624.30, Up $10.30.
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Housing and eurozone boost Gold’s safe haven appeal

Precious metals prices have been on quite the journey today, but as the eurozone issues continued to simmer and the disappointing domestic housing data was released, the early morning losses were replaced with gains throughout the

stock market

stock market (Photo credit: 401K)

mid-day and afternoon. Portfolio manager James Dailey said, “This morning’s reversal is indicative that people are starting to come to grips with the fact that there isn’t any fast and easy solution in Europe. And if things start to really get out of hand in Spain and Italy, that means gold can catch a bid.” Platinum price was also down with other industrial metals due to economic concerns.

The news out of the eurozone still involves Greece, but has really picked up with concerns building for Spain. Spanish banks continue reeling over the burst property bubble and flailing stock markets surrounding the banking sector. EU Economic and Monetary Affairs Commisioner Olli Rehn has offered a couple of options for the Spanish government to consider, including another year to work out a solvent budget or direct financial aid to distressed banks. In a move of concern the U.S. Treasury sent top official Lael Brainard to speak with Greece, Germany, Spain and France.

Domestic stock markets fell on disappointing housing data, Greece’s future in the euro currency and the solvency of Spanish banks. Overseer Hayes Miller said, “It’s a high-anxiety market… We’re not anywhere near the end of Europe’s debt crisis. In the U.S., economists are making the point that if housing were to stabilize, consumption could grow. The question is: what’s going to allow the housing market to stabilize?”

At 5:05 p.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,563.60 – Up $13.10.
  • Silver – $27.97 – Up $0.09.
  • Platinum – $1,402.60 – Down $27.50.
  • Palladium – $608.00 – Up $2.00.
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