Analyst: Time for QE3

Modern-day meeting of the Federal Open Market ...

Modern-day meeting of the Federal Open Market Committee at the Eccles Building, Washington, D.C. (Photo credit: Wikipedia)

Precious Metals are trading higher this morning in anticipation of the Federal Reserve meeting tomorrow.  After last week’s dismal jobs report, analysts believe the time is now for the Fed to act.  Mike Dueker of Russell Investments wrote, “If many (Federal Open Market Committee) members meant what they said about needing to see ‘substantial and sustainable strengthening in the pace of the economic recover’ in order not to implement a third around of quantitative easing, then it is time to act.

Germany’s Federal Constitutional Court blocked requests for an injunction which would rule German support of the eurozone rescue fund unconstitutional.  German Chancellor Angela Merkel said that the ruling sends “yet another strong signal to Europe and beyond: Germany is accepting its responsibility as the largest economy and reliable partner in Europe.”

The Platinum price is gaining at a much greater pace than other metals today 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.

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

  • Gold – $1,738.90 – Up $5.00.
  • Silver – $33.71 – Up $0.15.
  • Platinum – $1,646.10 – Up $38.10.
  • Palladium – $679.50 – Up $4.60.

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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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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