Precious metals moved by the U.S. election: Weekly Gold and Silver Market Recap for Nov 9, 2012

Precious metals moved by the U.S. election:

After months of speculation and questions about the political scene in the United States, this week brought forth closure to the subject. Before the votes were counted, many people believed each choice for president would shape the market for gold and other metals. The speculation on which candidate will be elected and what they will bring to the table has been strong today as many have shared their outlook for what it could mean for Gold. Phil Streible, senior commodities broker at RJO Futures offered his comments. To the possibility of President Obama being re-elected, he said we would continue to see, “fiscal irresponsibility, (Federal Reserve Chairman) Ben Bernanke going all the way through [his term], quantitative easing full throttle, weaker dollar.” Streible then speculated on a Mitt Romney victory, saying, “You get Romney and he’s planning on shrinking the government, cutting spending, becoming more fiscally responsible … so you’re probably going to see a stronger dollar, weaker metal on him.” After the votes were counted Wednesday morning gave light to the near future. The Gold price is giving up some early gains it enjoyed after President Barack Obama won a second term in the White House last night. Though the election is over, important issues are far from ending. Next up on the docket is the fiscal cliff at the end of the year. The President is now tasked with reaching a deal with a Republican-held House of Representatives, which is exactly the scenario that proved nearly impossible to solve over the past year or so. One analyst said, “I personally believe this will get sorted, but not after a lot of haggling and negotiating and this will create a lot of uncertainty and volatility in the markets.” By the end of the hectic week, the gold price rose and hit a three week high. There is an expectation that U.S. monetary policy will continue to favor Gold investors. Gold’s safe haven appeal grows when money flows easily into the economy as it does with the quantitative easing programs. Nic Brown, head of commodities research at Natixis said, “An Obama victory enhances the likely longevity of ongoing quantitative easing.” Outside of the U.S., China’s Gold demand is expected to grow 1 percent this year. This would be a record of 860 tons of Gold.

Europe’s financial problems grow:

While the world watched as the United States had an election, Europe continued losing ground in their economic crisis. One of the countries in the spotlight is Greece and this week was no different.  In Greece, the parliament is set to vote on budget cuts to help secure loans from lenders. However, the people of Greece are far from pleased with these proposed cuts. Today started a massive walk-out by two of the largest labor unions in the country. The estimated number of protesters was about 16,000, but could grow. The Greek people are not at a loss for words regarding the situation. “The measures are wrong, the politicians and the rich aren’t paying their taxes and the only ones paying are those on 300 and 500 euros a month,” said Dimitris Karavelas 42, who has been forced to shut down his small construction company. The bad news is not just in Greece but, in the entire region. In Europe, the outlook for the next year is far from optimistic. “Europe is going through a difficult process of macroeconomic rebalancing and adjustment which will last for some time still,” European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels. The eurozone economy is forecasted to almost completely stop expanding within the next six months. Even Germany, who is the largest economic force in the eurozone, has had their economic forecast cut by more than half in 2013. All of these factors will make it even more difficult to bring the region back to a stable economic situation. While this is bad news for the Europeans, it is not for the precious metal investors. The Gold price has risen today, following the euro’s rise after the European Central Bank (ECB) reaffirmed its intentions to pursue recently adopted monetary policy. Europe is in the spotlight today “with the ECB keeping accommodative policy in place and rates steady,” Jeffrey Wright, a managing director at Global Hunter Securities, said. “ECB policies, much like our own, eventually lead to inflation, which support Gold.” ECB President Mario Draghi announced plans to keep the central bank’s key lending rate at 0.75 percent. “Economic activity in the euro area is expected to remain weak,” Draghi stated as he pronounced a continuance of economic stimulus for the region.

Weekly Recap: The Fed Pulls The Trigger On Stimulus Plan

The Fed Pulls The Trigger On Stimulus Plan:

Precious Metals prices spiked Thursday after the announcement that a third round of quantitative easing (QE3) would start on Friday. In a statement, the Federal Open Market Committee said, “The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.” Of course, among the current conditions the Committee mentioned is a very stubborn 8 percent unemployment rate.  For QE3, the Fed will purchase mortgage-backed securities to the tune of $40 billion per month and monitor the results. This will be an “open-ended” bond-buying plan, so the end of the program will be decided at a later date when conditions improve.  News of this new program sent Gold up Thursday, closing up nearly 2 percent for the day and 10 percent for the month. “After the move we had, not just yesterday, but over the last two or three weeks, I think it would be natural to look for a period of consolidation,” said Tom Kendall, an analyst at Credit Suisse in London. “But certainly going into the back end of this year, I would be looking for Gold to be getting towards at least the $1,850 level.”

Platinum Climbs As Strikes Continue:

The Platinum prices gained at a much greater pace than other metals this week due to the unrest in South Africa. The top Platinum producer in the world, Anglo American Platinum, is now being affected by striking miners, who blockaded roads leading to shafts. “Fear of intimidation and threats by unidentified individuals in and around” certain locations caused some non-striking miners to be unable to report for work, according to a statement.  Reports were released that 10,000 striking platinum miners – many of whom were armed with sticks and machetes – marched on several Lonmin mine shafts threatening violence against strike breakers who are continuing to work. The recent strikes have inspired laborers in South African gold mines to rebel against their own employers. The result has been a stoppage of production at two Gold Fields (the world’s fourth largest gold producer) mines in the last several days. “We haven’t been given any demands but the pattern is the same as KDC East. It is intimidation. The strikers went around from hostel to hostel yesterday to prevent the others going to work,” Gold Fields spokesman Sven Lunsche said.

Concerns Over U.S. Debt Levels Climb:

German Finance Minister Wolfgang Schaeuble brought into question the United States’ high level of debt. He said in a speech this week to the lower house of parliament that U.S. debt is a burden for the global economy. He underscores the fact that the rest of the world is keeping their eye on the U.S. elections and is concerned about our ability to deal with our mounting debt once the elections are over. This comes just after the United States national debt reached an inauspicious $16 trillion. Credit rating agency Moody’s also warned this week that the U.S. may lose its Aaa credit rating if next year’s budget policies do not show a pattern of reducing the national debt over time. If budget talks “lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable,” Moody’s said in an emailed statement. “If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.” Last year rival Standard & Poor’s downgraded the U.S. credit from its top rating.

What will be Gold’s Next Move? Potential QE3 Announcement Wednesday

Precious metals prices have remained stable throughout the day following this morning’s trends with little movement. Federal Chairman Ben Bernanke will hold a press conference Wednesday and it is expected that additional easing measures will be announced. Anne-Laure Tremblay from BNP Paribas wrote in a note to clients, “Probable actions include interest rate cuts by the European Central Bank and the People’s Bank of China [and] further quantitative easing by the Federal Reserve,” she said, adding that such action would likely support gold buying. “Quantitative easing, or an expansion of a central bank’s balance sheet, is more favorable for gold prices…[as it] tends to have a strong negative impact on the U.S. dollar and is also more likely to raise inflationary expectations.”

As the Federal Reserve continues its two-day policy meeting tomorrow with a hopeful resolution to stimulate America’s economy analyst Dick Bove is patiently waiting, but not quietly. Bove considered what a third round of quantitative easing would actually do for the financial system he said, “It seems clear that the United States economy’s growth is slowing and that the global economy is facing major challenges. This suggests a need for some action by the Federal Reserve and other central banks,” Bove said in a note to clients. “It also appears to be just as evident that lowering interest rates to zero and printing more money are not effective options.”

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

  • Gold, $1,619.50, Down $8.00.
  • Silver, $28.47, Down $0.30.
  • Platinum, $1,481.50, Down $4.60.
  • Palladium, $630.40, Down $3.80.

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.