Greece and Spain hurt euro, drive down metals prices

 

Precious Metals are trading lower this morning, as central bank buying finally wasn’t enough to keep prices in positive territory.  Renewed concerns out of Greece and Spain have driven the euro downwards and strengthened the dollar.  However, analysts at Commerzbank noted, “Central banks are likely to continue to buy gold for the remainder of this year, thereby stripping supply from the market and contributing to climbing gold prices.”

Protesters have taken to the streets of Greece and Spain yet again.  The fresh Greek government is currently working on a budget with the European Central Bank, International Monetary Fund, and European Commission in order to receive more bailout funds.  The problem is that the Greek people have apparently reached a breaking point on austerity measures.  Author and economist Vicky Pryce said, “They are trying to see whether they can have a stay of execution, and the protests are actually probably going to help, because it’s obvious that they can’t take any more austerity.  The cost has been great for the Greeks … There’s just no light at the end of the tunnel at present.”

Spanish Prime Minister Mariano Rajoy seems to be gambling with his country’s well-being.  The latest speculation out of Spain is that Rajoy is delaying a bailout request because he believes that issues in Italy will worsen, making the bailout terms more friendly 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 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.”

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

  • Gold, $1,747.90, Down $17.50.
  • Silver, $33.69, Down $0.27.
  • Platinum, $1,621.60, Down $11.20.
  • Palladium, $624.00, Down $16.80.

 

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Precious metals, although higher today, are still experiencing a lot of volatility

Precious metals, although higher today, are still experiencing a lot of volatility through the day due to concerns growing over the eurozone debt crisis. Though risk remains elevated in the eurozone gold is holding steady. Domestic and sovereign concerns are hinged on central banks’ offerings of support. Analyst David Wilson said, “(Federal Reserve Chairman Ben) Bernanke, in comments made to the Congress committee last week, seemed to be intimating that QE was off the table… But I wonder (whether) if Europe continues to drag, the likelihood of QE continues to grow… That in itself should be supportive for gold.” Meanwhile in a note to investors Commerzbank wrote, “So far the financial aid promised to Spanish banks has failed to have its desired effect. On the contrary, the sell-off of Spanish and indeed Italian government bonds continues… The sovereign debt crisis can be expected to keep the markets on tenterhooks for quite some time yet and cause demand for gold to pick up again — not only among retail investors.”

Alex Tsipras is still viewed as a front runner in this weekend’s Greek elections. He also feels that the European Union does not want to kick Greece out, even after repealing the austerity measures inflicted for the bailout the country has already received. He said, “We have no sense that European partners will follow this tactic of blackmail heard from some quarters and stop funding… Something like that would be catastrophic not only for Greece but for the entire euro area… We want to simply convince our partners that it’s in the interests of all to stop sending EU taxpayers’ money into a bottomless pit. This money should be used properly in a program that is effective and not on a memorandum that has failed.” The Greek people are making a run on the banks ahead of these elections, causing more of an economic strain on an already tenuous situation. Tsipras spoke to this topic as well when he said, “To stop these outflows, this hemorrhage from the financial system, it is imperative to have support from all political sides that we’re working to stabilise the Greek economy. This scare-mongering on Greece leaving the euro must stop.

At 5:01 p.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,618.10 – Up $4.30.
  • Silver – $28.88 – Down $0.17.
  • Platinum – $1,466.00 – Up $9.60.
  • Palladium – $618.80 – Down $5.50.
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Gold Swings Between Gains and Declines Before Greek Vote

Gold Swings Between Gains and Declines Before Greek Vote (BusinessWeek)

Gold Edges Higher, Traders Warily Eye Europe (WSJ)

Wall St ends down amid Greek vote fears (Reuters)

Companies start to pay or increase dividends (USA Today)

Is Syria in a civil war? (CNN)

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Gold’s overreaction; a Greece solution in the works

Gold’s price drop has been well documented over the past few weeks. There have been many factors leading up to the shift in price. However, in the view of many investors, this is an opportunity based on a closer look at the numbers. CNBC Contributor Dennis Gartman was quoted in an interview as saying, “The public is massively bearish and that tells me it’s time to be bullish.” He later added, “Most people don’t think gold and stocks can go higher together, but I expect to see them trade dramatically higher over the course of the next several months,” he says. “The trend is now higher.”

The news from the World Bank could be a negative sign for the Asian region as a whole. Reports show that growth in the region has slowed from 10% in 2010 to 7.6% this year. The main factor is in China where the slowdown has had the largest effect. However, these rates are much stronger than the growth rate in the U.S.A., where the economy grew only 1.7% last year.

Germany has come up with a new idea to put an end to the finical disaster that is Greece. The plan would call for Greece to stay in the European Union, but adopt its own currency (Geuro). This idea has many positives. First, it gives Greece a chance to balance its budget without support from lenders. It will also allow them to reject the austerity program that they have been opposed to from the start. Thomas Mayer of Deutsche Bank noted on the idea of a separate currency for Greece, “Initially we would expect a large depreciation, but the Greek authorities would have the power to stabilize or even strengthen the exchange rate of the Geuro against the euro, via prudent fiscal policy and structural reform, so as to keep the door open to a future return to the euro.”

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

  • Gold – $1545.30- Down $32.80
  • Silver – $27.42 – Down $0.85
  • Platinum – $1415.90 – Down $44.50
  • Palladium – $593.20 – Down $24.40
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Precious metals continue to ride eurozone train

The concerns out of the eurozone continue to pull down the euro and strengthen the U.S. dollar, thus pulling down prices. Gold in particular has remained relatively fluid within a certain price range of $1,530 to $1,590. However a key price indicator in the short term continues to be $1,600 an ounce. However, euro pressure continues to be in the driver’s seat for prices. An unidentified international dealer said, “If we break above $1,600 and even go higher to confirm the bull trend, we will see more buying.”

Greek citizens continue to hold out for hope that money will be found to help bail the country and its citizens. The prevailing feeling is that Europe will not just cut their losses and kick Greece out of the eurozone. An alarming, almost de ja vu-ish feeling permeates through the country as some citizens say, “There’s a lot of money in this country, they just need to tax the rich and it would solve so many problems.” Does that sound familiar? The Greek citizens voice their displeasure through their voting results, with another election coming next month and fears that the drachma will come back.

The issues surrounding Greece do have some impact on the U.S. and should not be taken lightly. There are a few issues in particular including the U.S. banks’ susceptibility to eurozone debt. The weakening power of the euro as a currency could mean that U.S. goods would also become more expensive, diminishing the value of those goods. As well as the global impact that could be felt by other global powers like China.

At 8:01 a.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,579.50 – Down $10.70.
  • Silver – $28.29 – Down $0.12.
  • Platinum – $1,460.90 – Down $2.60.
  • Palladium – $613.70 – Up $0.90.
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Political turmoil in Greece suggests possible Euro exit

Gold has officially erased any gains it has earned in 2012 based on the current financial situation in Europe.  The eurozone debt crisis has been affecting the global market over the past week with Europe’s political uproar and an unknown economic outlook.  “Worries about Europe are pushing people to the dollar,” Frank McGhee, at Integrated Brokerage Services LLC.

The Greek election has frightened many that the nation may exit the eurozone, which in turn would create a catastrophe for the financial market.  “I think for as long as the crisis in Europe drags on, it’s going to keep sentiment broadly in check. At the moment, gold has been painted with the risk brush. It’s going to be very much a tracker of the equity markets,” said Nick Trevethan, a senior commodity strategist at ANZ in Singapore.  Economists at Citi have predicted the chances of Greece leaving the euro to be between 50 and 75 percent.   Billionaire investor, George Soros said,” The euro is seriously at risk. The consequences of a non-controlled implosion risks to be disastrous.”

Oil prices have continued to drop to its lowest level in almost five months due to Europe’s fiscal crisis along with Saudi Arabia’s oil minister who made it clear that prices could decline even more.  “Greece is unable to form a coalition government and Europe is the biggest problem right now,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. “When the Saudis speak, the market tends to listen. They’ve been trying to talk down the market for a while.”

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

  • Gold – $1557.80 – Down $27.70.
  • Silver – $28.19 – Down $0.78.
  • Platinum – $1439.10 – Down $33.30.
  • Palladium – $591.00 – Down $13.30.
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