The reactions to the Spain bailout are pessimistic

Goldman Sachs Group Inc. is forecasting a 23 percent return in a year for industrial metals with gold as one of their top picks. Jeffrey Currie, head of commodities research said, “Although the macroeconomic backdrop still remains uncertain, particularly in Europe, we believe that the selloff in commodity prices is likely overdone and the price risks are shifting more to the upside.”

Spain is now the fourth eurozone member to receive a bailout in the past three years when the debt crisis began in Europe. There is fear in the air that this bailout will put the nation in a deeper hole causing them to need assistance as well. Christian Reicherter at DZ Bank AG said, “This bailout doesn’t solve the euro-region debt crisis. There is skepticism about whether the money is enough for the banks and whether the nation might also need help, and this will keep Spanish bonds under pressure.”

The market is reacting to the Greek elections that are approaching with the U.S.A. stock market falling today. Investors are remaining cautious with the possibility of the Federal Reserve announcing another round of quantitative easing. Andrew Fitzpatrick at Hinsdale Associates said, “It’s a market that is looking to the next thing. It’s a market that is looking to the next thing. It could be Greece, and it could be further economic data. It’s a market waiting for possible Fed or European bank easing.”

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

  • Gold, $1,597.60, Up $6.20.
  • Silver, $28.61, Up $0.05.
  • Platinum, $1,445.70, Up $18.60.
  • Palladium, $622.00, Up $10.00.
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Precious metals are down 1%-2% this morning

Precious metals are down 1%-2% this morning as investors await news from an informal summit meeting in the eurozone.  David Morrison of GFT Markets said, “Although this is litle more than a taxpayer-funded dinner for Eurocrats ahead of the main summit in June, any further signs of a rift between Germany and France will see the euro and equities fall further.”  Lately, as the euro has moved, so have precious metals.

Germany and France are far from the only topic of note in the eurozone.  The main focus at the moment seems to be the potential exit of Greece from the group.  Jim O’Neill, chairman at Goldman Sachs Asset Management said, “The markets are putting together a higher probability for the end-game in the eurozone…” in reaction to high demand for Germany’s two-year, no-interest bonds being sold at the lowest yield ever.  Speaking on the ramifications of Greece leaving the bloc, he said, “Once one exits, it breaks the notion that it’s a true currency union and that is a big moment.”

Oil markets, which have historically held a positive correlation to gold, have been uneasy in the midst of sanctions placed on Iran and other happenings in the Middle East.  A meeting between Iran and six world powers, including the U.S.A., is taking place to continue to attempt to convince Iran to scale back its nuclear program.  Iran has made it clear that it will not be intimidated, however, Russia’s foreign minister believes that the impression is that Iran is “ready to seek agreement on concrete actions.”

At 9 a.m. (EDT), the APMEX precious metals spot prices were:

  • Gold – $1,563.10 – Down $15.10.
  • Silver – $27.87 – Down $0.40.
  • Platinum – $1,433.00 – Down $27.40.
  • Palladium – $609.50 – Down $8.00.

Gold price awaits FED action; Goldman Sachs predicts rise

Precious metals have extended their decline this morning, and Bill Greiner of Mariner Wealth Advisers explains that it has much to do with the Federal Reserve.  “It’s highly possible that we’ll see gold and commodities in general continue to drift down until the Fed steps in with some sort of quantitative easing package.”  In the past, gold and other precious metals have greatly benefited from quantitative easing.  Goldman Sachs’ commodity research team write that the Fed is likely to start another round of easing in June.

Likewise, Hussein Allidina of Morgan Stanley wrote that the European Central Bank will be forced to print money to attempt to alleviate some pressure of the eurozone debt crisis.  Morgan Stanley predicts an average price for gold of $1,825 this year and $2,175 in 2013.  With prices well below those targets, they are predicting that gold will spend a portion of the year well above those prices to balance it out.

U.S. stock futures are up slightly after housing reports showed that new homes are being built at a quicker pace than expected.  March’s numbers were revised sharply upwards, and April’s numbers still showed improvement.  However, permits for new construction, seen as a gauge of future demand, are down.

At 9 a.m. (EDT), the APMEX precious metals spot prices were:

  • Gold – $1,541.10 – Down $17.50.
  • Silver – $27.50 – Down $0.66.
  • Platinum – $1,430.10 – Down $17.40.
  • Palladium – $596.00 – Down $6.10.
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Wednesday Links: Goldman Sachs Report Says Buy Gold

Precious Metals

Gold Traders Struggle to Recognize the Fed’s Tune (WSJ)

Bernanke Sells The Gold Standard Short (SeekingAlpha)

Goldman Sachs: Buy Gold!  (WSJ)

Precious Metals Recap: Gold Fails to Break $1,700 (Fox Business)

Gold #1 Favored Investment Acording to CNBC Survey (CNBC)

Gold prices moved below $1,660 an ounce today, as profit-taking was accelerated late in the session by a COMEX options expiration. (APMEX)


Stocks slide on economic jitters (CNN)

Stocks follow oil lower on reserve talks (Reuters)

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