End of week report: Gold’s Move Tied To Central Bank Action?

 

Gold’s Move Tied To Central Bank Action?:

Quantitative easing (QE) from either the European Central Bank (ECB) or the Fed seems to be the key factor in a rally for the price of Gold. Should either central bank announce a round of QE, prices are likely to increase due to the results of such action all being supportive of the Gold price. Investors shouldn’t be surprised to see action from Europe before the U.S., however. London’s Marex Spectron said in a note, “The eurozone appears to continue to struggle, while the U.S. keeps surprising the market with positive figures. This only enhances the chance the ECB is more likely to act before the Fed.”  The upward push on Gold is being kept in check somewhat by the mixed United States economic data that suggests the U.S. Federal Reserve will continue its “wait and see” attitude. The Jackson Hole meeting at the end of this month could bring into focus what central banks are planning to do. “After Jackson Hole, the markets will hopefully have a better idea,” said Afshin Nabavi, head of trading at MKS Finance. “Until then, we should continue trading within this range.” A lack of liquidity over the quiet summer months was preventing Gold from moving higher, he said.

Weakening Rupee Hurts Demand:

Physical demand for Gold is taking a hit in India now. That country has been the world’s largest consumer of Gold, in large part due to its high demand for use in jewelry. The two factors that are playing into the softening demand are an increase in import duties and a weak Indian rupee, which drives the local price of Gold higher. Combined with a stronger dollar and weaker euro, the rest of the world is seeing the Gold price hover around $1,600 per ounce. With currency trade on one end and the desire for a safe haven investment on the other, Gold seems to be tugged by both sides at the moment, waiting for a potential announcement on QE from either the United States Federal Reserve or the European Central Bank. India’s festival season has begun and will peak in November. This is a time for weddings and giving Gold gifts.

Mine Violence Sparks Platinum Prices:

Platinum prices have spiked Thursday as a bloody conflict between South African police and striking miners at Lonmin’s Marikana Platinum mine resulted in many injuries and an unconfirmed number of fatalities. The police moved to disperse the estimated 3,000 miners by force after talks broke down with the Association of Mineworkers and Construction Union. Today’s violence caps off a week of fighting that has already seen ten deaths, two of which were police. Lonmin said it had lost the equivalent of 15,000 ounces of Platinum from the six-day disruption, and was unlikely to meet its full-year production target of 750,000 ounces.  Friday saw the confrontation between police and South African miners at Lonmin PLC has escalating, causing Platinum to rise drastically for the second straight day. South Africa produces 75 percent of the world’s Platinum, and concern over its output could spur further gains.

 

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Gold Prices Slightly Lower in Overnight Trading

 

 

Gold and equity markets are both poised to advance in the event the European leaders announce a plan to bail out Spain and curb further contagion. Spain has requested further euro zone support in buying its sovereign debt. Germany continues to be resistant to this notion and this does set up a clash of wills as German finance officials prepare to meet with U.S. Treasury Secretary, Tim Geithner. Mr. Geithner has stated that the euro zone crisis is the biggest threat to the U.S. economy, so it is expected he will put pressure on Germany to take additional action.

 

The economic picture in Spain continues to worsen as their recession deepened in the 2nd quarter. Tough new austerity measures were enacted and this did take a toll on overall demand and consumer prices. Consumer prices rose 2.2% year over year. All in all, this paints a difficult picture for Spain to climb out of their budget deficit.

 

European stocks are currently trading higher on the hopes of the European Central Bank stepping in with additional measures, while U.S. stock futures are trading lower as they await potential action.

 

At 9 AM EST the APMEX precious metals prices were:

 

  • Gold price – $1,618.00 – down $2.20
  • Silver price – $27.78 – up 19 cents
  • Platinum price – $1,410.70 – up $2.50
  • Palladium price – $582.50 – up $9.60

 

 

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Gold Bounces Back Along with the Euro

 

Gold is recovering from recent losses along with the euro this morning. A policymaker from the European Central Bank hinted that Europe’s rescue fund could get a banking license, allowing easy access to cheap funding from the ECB. While just a small mention from one policymaker, it has been enough to snap a five-day losing streak for the euro.

Germany, which has long been the strong point in the eurozone, is starting to feel the heat from the rest of the eurozone, said Mike Jones of Bank of New Zealand. Jones said, “The economic weakness in Europe is spreading from the periphery to Germany. Even the engine of European growth is starting to lose steam, and that’s undermining European sentiment.”

The United Kingdom is also in a bad spot. Nick Parsons of National Australia Bank in London said that, by the end of the year, he expects an interest rate cut in the country and “more quantitative easing is going to be needed.” The U.K.’s economy shrank more than expected in the second quarter, showing that Britain has “deep-rooted economic problems,” Finance Minister George Osborne said.

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

  • Gold, $1,602.40, Up $24.60.
  • Silver, $27.34, Up $0.44.
  • Platinum, $1,403.60, Up $17.00.
  • Palladium, $567.60, Up $5.10.

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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Gold moves with the dollar. Unrest in Syria persists

 

While a strong U.S. dollar continues to put pressure on gold prices, many investors are showing confidence in gold after it fared well during yesterday’s sell off. “Gold is just moving with the U.S. dollar,” MKS Finance head of trading Afshin Nabavi said. “Yesterday, below the $1,570 level, we saw some light physical related interest come in. Today it has been very quiet.” The euro/dollar exchange rate has been a primary driver in day to day movement in gold.

Global unrest adds to the cloud of global economic uncertainty. The Syrian conflict continues to be a source of concern as rebel troops and forces of embattled President Bashar al-Assad continue to clash. US concerns were increased as Damascus has admitted it has, and is willing to use chemical and biological arms in the event of what it calls foreign intervention. U.S. President Barack Obama said the world would hold Assad and his entourage accountable “should they make the tragic mistake of using those (chemical) weapons

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

  • Gold, $1,576.40, Down $2.50.
  • Silver, $26.85, Down $0.28.
  • Platinum, $1,386.80, Down $12.10.
  • Palladium, $562.90, Down $9.10.

APMEX’s Account Managers now have extended hours and are here to serve you until 7 p.m. (CDT) Mondays through Thursdays! If you have any questions about investing in precious metals or would simply prefer to place your order by telephone, we are here to help

 

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Credit Outlook Dims for Germany; U.S. Fiscal Cliff Looms

 

Precious metals continue to hold firm in the serious head winds afflicting other commodities markets. Gold in particular has been relatively range bound but in the current market conditions, that’s not an entirely bad thing. Analyst Hayden Atkins said, “Markets sold off really heavily yesterday, and gold held up pretty well against that. It is maybe the one thing that has really stayed solid against some pretty solid headwinds elsewhere.” Meanwhile the issues facing the euro have actually helped Gold in the eurozone as evidenced by Commerzbank’s note to investors which read, “Thanks to the euro’s depreciation vis-a-vis the U.S. dollar, gold in euro terms has been making gains for some time now. Since mid-May an upswing has become evident which in the current market environment should take the yellow metal on a further upward trajectory.”

Meanwhile Moody’s downgraded the credit outlooks of a few of the remaining Aaa rated countries in the eurozone. Those countries are Germany, the Netherlands and Luxembourg. Basically the main countries that would provide assistance to other countries in the region that may need financial assistance. The service released a statement saying, “Moody’s now has negative outlooks on those Aaa-rated euro-area sovereigns whose balance sheets are expected to bear the main financial burden of support — whether because of the need to expand the European Stability Mechanism (ESM) or the need to develop more ad hoc forms of liquidity support.”

U.S. Treasury Secretary Timothy Geithner has already begun speaking towards the potential outcome of kicking the can down the road with the current fiscal situation. In an interview yesterday he said, “Many people who look at this say that, yes, you’d at least get a recession out of this. The cumulative size of those cuts – tax increases and spending cuts – are very, very large relative to the economy.” He also warned that any governmental failure could be quite damaging, relating it to the negative impact of losing the U.S. credit rating last year over debt ceiling talks. He said, “You saw huge damage to consumer confidence, to business confidence, and to confidence around the world in the United States because you had people in public office threatening to default on our nation’s obligations.”

At 9:00 a.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold, $1,579.90, Up $1.00.
  • Silver, $27.06, Down $0.08.
  • Platinum, $1,397.60, Down $1.30.
  • Palladium, $569.40, Down $2.60.

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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Gold Seeks Direction Amid Global Economic Woes

As the week comes to a close, two things stand out in the marketplace. First are the unexpected positive job reports in the United States. These reports have given life to the dollar and taken the steam out of Gold’s two week rally. Second, negative economic news continues to flow out of Europe and China. Both have cut key interest rates, and that could be a good sign for Gold’s global outlook. “While the ECB cut was near term bearish for Gold, as it weakened the euro, it may be more bullish longer term. Added global liquidity, with policy easing measures from the eurozone, China and the Bank of England, may stimulate demand for hard assets, including Gold,” HSBC financial services wrote in a note.

The United States has been improving steadily in many key economic factors. Employment reports have shown fewer Americans without work. The housing market has turned a corner and is making up lost ground. The issue is with the pace of the improvement. Even with the unemployment numbers dropping, it is such an insignificant amount that the overall percentage remained unchanged. “Growth has been low, and there remains uncertainty about the economy and policy here and abroad. All of those things are weighing on activity, but overall I’d put it on low growth in the U.S.,” said economist Andrew Tilton of Goldman Sachs.

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

  • Gold, $1633.89, Down $21.48.
  • Silver, $28.02, Down $0.48.
  • Platinum, $1490.96, Down $25.89.
  • Palladium, $595.25, Down $7.71.
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Central Bank Considers Reclassification of Gold Bullion

The Central Bank of the US Federal Reserve released a memo on June 18, which calls for the reclassification of gold from a 50% weighting to a 100% weighting. Currently, for every $1.00 held by the banks or central bank only 50 cents can be claimed as book value. By changing gold to a 100% weighting, it would retain full value just like other financial instruments. This would enhance gold’s appeal to the banking community and possibly drive up demand.

Friday’s big jump in the stock market was a reaction to news that European leaders are going to come up with a viable bailout plan. Although this was welcome, it is still a bailout and the European economies are still desperately struggling. U.S. companies are affected as well, and this is expected to show in the upcoming earning reports. Many U.S. companies are issuing warnings and they site Europe as a key factor for their disappointing numbers. Second quarter reports will show the euro debt crisis, weak European and Chinese demand, decline of the euro and the overall global economy will affect the earnings of many U.S. firms.

At 9AM EST the APMEX precious metals prices were:

  • Gold price – $1,594.50 – down $11.20
  • Silver price – $27.53 – down 15 cents
  • Platinum price – $1,439.50 – down $11.40
  • Palladium price – $580.90 – down $4.70
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