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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Europe in the Crosshairs of G20 Leaders

First on the list of priorities at the meeting of the leaders of the world’s twenty largest economies is – no surprise here – the financial crisis in Europe that has been stewing for over two years now.  President Barack Obama has scheduled one-on-one meetings with German Chancellor Angela Merkel about the European crisis, and Russian President Vladimir Putin about the conflict in Syria, in which Russia plays a large role as Syria’s primary arms supplier.

Bond yields on Spanish government debt hit a fresh high today, signaling the market’s growing reluctance to continue loaning money to the insolvent country.  Yields topped 7 percent, the highest since Spain joined the Euro.  “By requesting external assistance for the euro zone’s fourth-largest economy, the Rajoy government has pushed Spain, Italy and the bloc as a whole into uncharted waters,” said Nicolas Spiro, managing director of Spiro Sovereign Strategy.  “Politically speaking, the ‘line of credit’ to Spain has already failed.“

Elections in Greece on Sunday failed to calm jittery markets as stocks and commodities turned negative today.  After the pro-Euro and pro-bailout New Democracy party won in Greece, Michelle Gibley, director of international research at the Schwab Center for Financial Research said, “Even though we avoided the worst-case scenario in Greece, the crisis has entered a new and dangerous phase, and it doesn’t end with Greece.”

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

  • Gold, $1,629.30, Up $0.70.
  • Silver, $28.78 Down $0.06.
  • Platinum, $1,484.80, Down $4.40.
  • Palladium, $635.60, Up $4.30.

Morning Gold & Silver Market Report, 6/18/2012

GREECE VOTES FOR AUSTERITY, BUT SPAIN HOLDS DOWN OPTIMISM

American stock futures, Gold, and Silver are all trading flat or lower this morning. Optimism from Greece’s election is wearing thin thanks to renewed worries from Spain. In Greece, Sunday’s election seems to be a victory for a pro-austerity party, though investors seem to be waiting for more information from Spain before they get too excited. Steen Jakobsen of Saxo Bank said, “The market knows this is about buying time, and as the main story is now Spain … we need more details on banking reports and Germany’s intention. It’s more concerning that (shortly into the European trading day), Spain is back in focus.”

Commerzbank analyst Eugen Weinberg said, “It seems the market is still in a negative mood, so we are still expecting the slide on the commodity markets to continue. This is definitely helping Gold.” This month has seen Gold move as a safe haven once more after seemingly losing some of its safe haven appeal in recent months, and this is likely because of hints from the Federal Reserve about further quantitative easing in the United States.

Ashraf Laidi of City Index said he believes the Fed will announce more financial stimulus this week. “One reason we expect the euro to push higher has nothing to do with Greece. We think the Fed is going to open the door to further stimulus on Wednesday.” The stimulus could come in the form of extending the Fed’s unpopular “Operation Twist,” which is scheduled to end this month.

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

  • Gold, $1,619.90, Down $8.20.
  • Silver, $28.41, Down $0.43.
  • Platinum, $1,486.00, Down $3.20.
  • Palladium, $630.30, Down $1.10.

Greek Election Has Investors Poised To Act

Precious Metals are on the rise this morning ahead of what is viewed as a key Greek election. Global investors are most likely moving from their cash positions to the safe haven of Gold. Analyst Andrey Kryuchenkov said, “Not many will dare take on fresh longs ahead of the weekend given Gold’s peculiar behavior recently, when it swings back and forth with or against risk sentiment.” In a note to its investors, HSBC wrote, “The next big event in the Gold world is likely to be the Greek election. Gold may be caught between the election and U.S. monetary expectations.”

Worldwide central banks stand poised to take action based upon Sunday’s Greek election. European Central Bank President Mario Draghi has hinted at poor economic conditions as a result of this election and is poised to act. He said, “There are serious downside risks here. … This risk has to do mostly with the heightened uncertainty.” The seriousness is evident as not only the ECB is poised to act, but countries including Japan, England and other G20 nations are preparing to stabilize the global impact. And although since his election, and differing views, French President Francois Hollande has taken Germany to task but shares the same view when it comes to Greece and Sunday’s election when he said, “But I have to warn them, because I am a friend of Greece, that if the impression is given that Greece wants to distance itself from its commitments and abandon all prospect of recovery, there will be countries in the eurozone which will prefer to finish with the presence of Greece in the eurozone.”

American markets are also holding firm ahead of the elections, as well. Strategist Peter Boockvar said, “Ahead of Sunday’s election in Greece, central bankers stand ready, again. With all the water central banks have expended out of their fire hoses over the past few years in their attempt to ‘do something,’ I can only think of magic candles — those candles you blow out that only flare up again immediately after.” The G20 is set to meet next week in Mexico, and financial leaders are expected to discuss the weakest global economy since 2009.

At 9:01 a.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,625.00, Up $5.40.
  • Silver, $28.76, Up $0.25.
  • Platinum, $1,497.00, Up $7.40.
  • Palladium, $634.70, Down $1.20.

Gold slightly higher

American stock futures are mostly flat this morning, with many investors seemingly unsure how to react to recent developments in Europe and the U.S.A.  David Morrison of GFT Markets said, “As we have seen many times recently, the previous day’s price action has been reversed in early trading.  Yesterday we saw stocks rally” as a result of J.P. Morgan’s CEO testifying before the Senate Banking Committee.  However, stocks “then tumbled after an auction of U.S.A. 10-year Treasuries,” added Morrison.  While investors believe stocks may not be the safest place for their money, Morrison explained, “An increasing number are coming to the opinion that this continued flight into U.S.A. Treasuries despite pathetic yields is a very bad sign indeed.”  Gold could benefit from this realization, as the metal has historically been a safe haven investment in times of uncertainty.

At a recent bond auction, the yield on 10-year bonds in Spain rose above 7 percent, which was the trigger point for Greece, Ireland, and Portugal when those countries requested aid from the European Central Bank.  Moody’s Investor Service cut Spain’s credit rating by three notches, and now rests one level above junk status.  The pressure is on German Chancellor Angela Merkel to come up with a solution, but she recently shot down what she termed “miracle solutions,” calling them counterproductive and said that they would violate the German constitution.

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

  • Gold – $1,627.50 – Up $8.10.
  • Silver – $29.01 – Down $0.03.
  • Platinum – $1,486.80 – Up $18.00.
  • Palladium – $625.00 – Up $1.80.
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