Market down on news from Spain and upcoming earnings reports

NEW YORK - NOVEMBER 16:  Traders work on the f...

NEW YORK – NOVEMBER 16: (Image credit: Getty Images via @daylife)

The Dow Jones Industrial Average and S&P 500 are down slightly this morning as all eyes remained fixed on Spain. Spanish Prime Minister Mariano Rajoy stated today that a call for bailout funds is not imminent. News of the delay came after the close of European markets that had rallied all day in anticipation of an impending stimulus announcement.

No key market news has been announced in the United States today but stocks are down following news from Spain and investors’ growing concern over upcoming quarterly corporate earnings reports. The “liquidity-infused high from QE3” is wearing off and investors are beginning “to worry that corporate earnings will not only be down, but be worse than expected,” said Keith Springer, president of Springer Financial Advisors in Sacramento, California.

Gold and Silver were also down today with continued news of slowing demand in China and India. “While the market has been going up on the stimulus fever, lack of support from physical demand is putting some pressure on prices,” said Marc Ground, a commodity strategist at Standard Bank in Johannesburg. As the U.S. Gold price continues to largely track the euro, investors will await news from the eurozone for word on a Spanish assistance program.

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

  • Gold, $1,779.80, Down $4.70.
  • Silver, $34.82, Down $0.13.
  • Platinum, $1,684.90, Up $2.10.
  • Palladium, $654.50, Up $8.00.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EDT)! Or call us Fridays until 6 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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End of the week report: Spain, QE3 and Gold Prices

 

Gold Consolidates:

 

 

 

 

 

“After rapidly rising between mid-August and mid-September, Gold has since been consolidating,” BNP Paribas analyst Anne-Laure Tremblay said. “Short term, we could see a limited correction before the price resumes its ascent. The U.S. dollar has been strengthening of late, particularly against the euro. This is likely weighing on the Gold price. Beyond this, the Gold market is just taking a breather, as it is not far off the $1,800 an ounce level, which constitutes a strong resistance.” The break in price in Gold has not gone unnoticed by investors. Gold-backed funds increased by almost 300,000 ounces this week according to reports.  One piece of news that also gained attention this week is the amount of Gold that countries have been adding to their central banking systems. South Korea and Paraguay lead all other countries by adding more than 24 tons of Gold to their reserves in July alone. “Whether you’re looking at physical flows into ETFs or the options market, activity has clearly been on the bullish side, and that will see prices move higher as we go through the fourth quarter,” said Credit Suisse analyst Tom Kendall.

 

 

 

 

 

QE3 Questions?:

 

 

 

 

 

Not all members of the U.S. Federal Reserve appear to agree on the benefit or effectiveness of the recently announced new round of quantitative easing (QE3). Charles Plosser, President of the Federal Reserve Bank of Philadelphia, is concerned that not only will the new bond-buying program not work, but that it might also call into question the credibility of the U.S. central bank. “We are unlikely to see much benefit to growth or to employment from further asset purchases,” said President Plosser. “Conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed’s credibility.” U.S. investors are buying U.S. Treasuries at a quicker pace than international investors for the first time since 2010. This has certainly contributed to the U.S. debt climbing above $16 trillion USD for the first time. U.S. Treasuries have become popular despite their record-low yields because many investors also share the concern that QE3 will not succeed in stimulating the economy and creating more jobs. International investors still own 50.4 percent of the U.S. Treasuries, but this is down from the 55.7 percent share owned in 2008.

 

 

 

 

 

 

 

 

 

 

 

Spanish Gamble?:

 

 

 

 

 

Spanish Prime Minister Mariano Rajoy seemed to be gambling with his country’s well-being. The latest speculation out of Spain was that Rajoy was delaying a bailout request because he believed that issues in Italy will worsen, making the bailout terms friendlier 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 of a 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.”  Protests on the streets of Spain intensified during the week as the country began to roll out economic reforms along with its new budget.  Prime Minister Mariano Rajoy said, “We know what we have to do, and since we know it, we’re doing it. We also know this entails a lot of sacrifices distributed… evenly throughout the Spanish society.” His words, and the measures he intends to enact, are not enough to soothe all dissenting voices. A member of parliament was quoted as saying, “On paper they can make it all add up, but it will be hard to make the budget credible given all the reasonable doubts on the deficit target. It will be really tough to make the markets buy it.”  An audit of Spanish banks was also expected to be completed this week. The eurozone’s third largest economy has seen much trouble lately, and has been hit hard by the housing crisis. Citizens of Madrid continue to protest the announced austerity measures , and one region of the country has even threatened to break away from Spain. The overwhelming expectation is that these measures are the first part of Spain formally requesting a bailout from the European Union. At one point, Spain was feared as “too big to fail,” or at least too big to bail out, so it will be interesting to see how the EU handles this situation.

 

 

 

 

 

 

 

 

 

 

 

 

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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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QE3 decision coming at 12:30 P.M. EDT

 

Gold and Silver prices are mostly flat this morning as investors await a Federal Reserve monetary policy decision.  Fed Chairman Ben Bernanke is scheduled for a press conference at 2:15 p.m. (EDT), though the policy decision should be out closer to 12:30 p.m. (EDT).  David Morrison of GFT Markets believes that the markets have “priced in significant action from the (Fed).  The expectation is for a further round of large-scale asset purchases similar to 2010’s $600 billion QE2 program.” He continued, “The language accompanying another round of quantitative easing will be all-important” because if the Fed decides to wait, the markets could be in for disappointment.

Prices remained stable after the weekly jobless claims report was released.  Claims rose by 15,000 last week, about 12,000 more than expected.  Guy Berger of RBS Securities, Inc. said, “The labor market continues to be disappointing.  We’d like to see the hiring side pick up.  Companies are very cautious given all the uncertainty.”

One of the countries hit hardest by the eurozone debt crisis is Spain, which boasts the third-largest economy in the eurozone.  Spain’s prime minister Mariano Rajoy suggested to parliament yesterday that Spain may not need to ask for a bailout due to the success of the European Central Bank’s bond-buying program.  Many experts believe a bailout will be necessary eventually, however, and the delay in asking for one could prove to make things worse by way of conditions for receiving bailout funds.  Goldman Sachs analysts wrote, “The more the Spanish administration indulges domestic political interests and is perceived to be taking undue advantage of external support, the more explicit conditionality is likely to be demanded.”

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

  • Gold, $1,734.40, Up $1.70.
  • Silver, $33.21, Down $0.09.
  • Platinum, $1,661.40, Up $10.80.
  • Palladium, $684.60, Up $5.30.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EDT)! Or call us Fridays until 6 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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Euro region unusually divided before summit

Precious Metals are trading lower this morning, thanks to investors moving to the sidelines ahead of the European Union summit, which starts tomorrow.  Michael Turner of RBC Capital Markets said, “This could be a reasonably long holding pattern until the headlines start to flow from the European Council’s heads of state summit tomorrow.”  The wait-and-see approach has currencies like the U.S.A. dollar and the euro trading mostly flat.

While summer is likely to not hold any big moves by policymakers in the U.S.A., Europe, or China, Deutsche Bank analyst Daniel Brebner believes one thing could support gold.  “…I think we’ll continue to see very steady buying by central banks, which have been in the market for the last couple of quarters or so.  That should help gold prices from weakening…” he said.

European leaders aren’t exactly agreeable ahead of the summit.  German Chancellor Angela Merkel, in response to euro bonds being a potential solution to the debt crisis, said that she doesn’t expect that to happen in her lifetime.  With borrowing costs in Italy and Spain reaching dangerous levels, the leaders of those countries are calling for assistance, and Merkel wasn’t keen on that idea either.  Spanish Prime Minister Mariano Rajoy said, “The most urgent issue is the one of financing.  We can’t keep funding ourselves for a long time at the prices we’re currently funding ourselves.”

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

  • Gold – $1,567.30 – Down $9.10.
  • Silver – $26.80 – Down $0.36.
  • Platinum – $1,409.70 – Down $19.20.
  • Palladium – $580.10 – Down $14.60.
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