Fed chairman set to speak; should eurozone look at Gold differently?

 

U.S. stock futures and Precious Metals are enjoying a boost this morning in anticipation of Federal Reserve Chairman Ben Bernanke’s speech at Jackson Hole, Wyo., set to begin at 10 a.m. (EDT). Many investors are expecting Bernanke to strongly hint about a new round of quantitative easing, if not deliver an outright announcement. Peter Cardillo of Rockwell Global Capital said, “Obviously the market has discounted the fact Mr. Bernanke is not going to announce (a third round of quantitative easing), but he will acknowledge the fact there is a growing possibility that it could happen, so I think that’s what the market is looking at.”

The World Gold Council is suggesting a creative way of looking at Gold in the eurozone. Many pundits have suggested that troubled eurozone countries sell Gold to take care of their debts. This ill advised idea sounds like a simple resolution, but of course it is more complicated than that. The World Gold Council has suggested bonds and loans backed by Gold. Some groups (LCH.Clearnet, Intercontinental Exchange, and the Chicago Mercantile Exchange) have begun accepting Gold as collateral for margin requirements recently. Gillian Tett of Financial Times wrote that this “suggest(s) that a slow evolution of attitudes is under way — not so much in terms of the desirability of Gold per se, but the increasing undesirability and riskiness of other supposedly ‘safe’ assets, such as government bonds.”

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

  • Gold, 1,662.90, Up $7.30.
  • Silver, $30.79, Up $0.34.
  • Platinum, $1,519.20, Up $14.50.
  • Palladium, $625.80, Up $625.80.

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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Anticipation for Friday grows, affects the markets

 

The dominant news of the week will be speculation as to what will or won’t be announced during the annual Jackson Hole symposium.  Anticipation leading up to those announcements left stocks flat.  David Morrison, senior market strategist at GFT Markets in London, said “There are hopes that the Fed chairman will signal that another round of quantitative easing (QE) is imminent, although it seems more likely that he will keep investors guessing, while assuring them that the Federal Reserve stands ready to intervene further, if required.”

 

The eurozone is in a battle of its own, regardless of what Bernanke says at Jackson Hole.  Spain is being sucked into the center of the eurozone debt crisis.  Spanish consumers have pulled as much as 5 percent of their private sector deposits.  The other side of this coin is that Greek banks are seeing a boost in their deposits since their June elections.  Private sector deposits are up about 2 percent.

 

Official portrait of Federal Reserve Chairman ...

Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)

 

Gold is riding a three month increase in price, up 3.1 percent.  This is the highest percentage increase since January.  The rising prices are fueled, in part, by expectations for what will come from the Jackson Hole meeting.  Gold’s meteoric rise in price, doubling since 2008, has been fueled by the Fed’s QE tactics.  For those that are risk adverse, gold holds a strong appeal; as currencies inflate, gold will always be a store of wealth as its value is historically independent of any one currency.

 

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

 

  • Gold, $1,665.40, Down $8.70.
  • Silver, $30.90, Down $0.24.
  • Platinum, $1,524.50, Down $29.70.
  • Palladium, $640.40, Down $15.80.

 

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Jobless claims disappoint, leaving door open for QE3

 

English: James Bullard, president of the Feder...

English: James Bullard, president of the Federal Reserve Bank of St. Louis (Photo credit: Wikipedia)

 

Precious Metals prices added to early gains after the release of the weekly jobless claims report. After an upward revision from last week’s numbers, the report showed increases across the board in new claims, existing claims, and the four week moving average. Jumps in the prices of Gold and Silver are most likely due to the fact that yesterday’s Federal Open Market Committee (FOMC) meeting minutes revealed that a third round of quantitative easing (QE3) was likely unless there was significant improvement in economic reports, and this report certainly does not indicate improvement.

 

In stark contrast to the minutes of the FOMC meeting released yesterday, St. Louis Federal Reserve President James Bullard said, “If we were to resume, and I think we will, 2 percent growth, maybe a bit stronger than that in the second half of the year, unemployment ticks down through the rest of the year, that’s not a great outcome but that’s a good enough outcome to keep us on hold,” regarding QE3. Bullard also said the market may be setting itself up for disappointment. He said, “Probably the best thing to talk about here is what would that action really be? I think the markets have the idea of some gigantic action. I’m not sure if the data really warrants that.”

 

The euro continues to rise against the dollar, which is supporting the Gold price’s recent moves. Chen Min of Jinrui Futures in China said, “The Fed’s tone is totally different in the minutes from previous comments, and that helped Gold break from the previous range and move into a higher price range ahead of the peak consumption season.”

 

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

 

  • Gold, $1,664.20, Up $24.90.
  • Silver, $30.50, Up $0.83.
  • Platinum, $1,543.80, Up $16.30.
  • Palladium, $637.90, Up $7.70.

 

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Gold at a two-month high, breaks key level

 

Gold prices are at a two-month high this morning, tracking the euro upwards.  VTB Capital analyst Andrey Kryuchenkov said, “A break above $1,630 is very significant, as we breach the June-July and early August range.  Buy orders were triggered, with the dollar index also slipping below support … at early July lows.  This is on speculation that the ECB will act.”  Kryuchenkov went on to say that as normal, Gold is trading against the dollar in this case.

Today’s trading aside, the dollar has enjoyed a rally lately on risk aversion.  However, that could all be undone, and the culprit could be the Federal Reserve.  Simon Derrick of BNY Mellon said, “If you look at the dollar’s performance over the last few years when quantitative easing (QE) was introduced, the dollar was absolutely weaker… were they to reintroduce QE, would that reintroduce dollar weakness?  Absolutely.”  Investors are looking to the Jackson Hole Economic Symposium, scheduled for next week, for a sign that another round of QE is on the horizon.

Today’s rally in the euro could be things getting better for the euro before they get worse.  Jane Foley of Rabobank International said, “The market may be optimistic that the (European Central Bank) will act to subdue peripheral yields in September, but that implies that there is plenty of scope for disappointment.”  This scope for disappointment is something that is common when the market pre-prices events such as central bank interventions that don’t always see the light of day.

At 9:34 a.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,638.80, Up $17.40.
  • Silver, $29.31, Up $0.61.
  • Platinum, $1,507.00, Up $7.80.
  • Palladium, $621.80, Up $12.60.

APMEX’s Account Managers now have extended hours Mondays through Fridays and are here to serve you until 8 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 being pulled in both directions

 

Precious Metals prices recovered slightly after two economic reports were released this morning. United States housing starts and jobless claims were worse than expected. Economists expected housing starts to rise slightly, but they fell by 1.1 percent. Economists also expected a rise of about 1,000 in new jobless claims, but the real result was slightly higher at 2,000. These reports could give the Federal Reserve more ground for another round of quantitative easing (QE), about which some are expecting a decision later this month.

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.

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

  • Gold, $1,608.30, Up $3.20.
  • Silver, $27.97, Up $0.05.
  • Platinum, $1,402.60, Up $5.40.
  • Palladium, $580.40, Up $0.90.

 

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Is the euro currency already dead?

 

Precious metals recovered from early losses this morning after the release of the Consumer Price Index showed the smallest year-over-year increase in nearly two years.  The better-than-expected report could support the Federal Reserve’s looming decision on another round of monetary stimulus.  Also, a key business gauge contracted unexpectedly for the first time in nearly a year.  The “Empire State” index showed a drop to minus 5.85 from 7.39 last month.

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 the ECB is more likely to act before the Fed.”

Matthew Lynn of Marketwatch writes that the euro as a currency is much like a zombie.  He writes, “Some countries can’t use the euro for imports because of fears that drachmas or lire may suddenly replace euros.”  Lynn explains that oil traders, for instance, may be wary of selling oil to a country like Greece, because when payment is due six months down the the road, they may not be paying in euros, but in something worth far less.  “When a currency stops working the damage done to the economy is immediate.  Trade stops flowing.  Investment gets postponed.  Capital flees.  Very quickly, unemployment starts to rise, and output declines.  That is exactly what is happening in the eurozone right now,” he writes.

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

  • Gold, $1,601.10, Up $0.20.
  • Silver, $27.92, Up $0.05.
  • Platinum, $1,398.70, Down $1.50.
  • Palladium, $577.90, Down $2.00.

 

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Economic reports better than expected; Gold stagnates

 

American stock futures and Precious Metals rebounded this morning after two economic reports were released. The trade deficit narrowed to the smallest gap in nearly two years, and weekly jobless claims fell after economists expected an increase. The four week moving average of the jobless claims, however, increased slightly. Recently, good news for the American economy has worked the opposite way with Precious Metals, as good news makes the Federal Reserve less likely to institute another round of quantitative easing.

Economist David Rosenberg said the U.S. economy is not growing as quickly as it should. He said, “The overall story is that with the massive intervention by the U.S. government and the Federal Reserve, they did manage to terminate the Great Recession in the mid part of 2009, but the reality is that we never had much of a recovery, at least in the economy. And in terms of what we’re seeing going forward, I still think that there’s more downside risk than upside potential.”

The Gold price was steady this morning, though losses in the euro seemed to be trying to pull it down. Societe Generale analyst Robin Bhar said, “Gold seems to have gotten a foothold above the $1,600 level and seems to be relatively stable. It’s still showing this correlation to riskier assets. We’ve seen a bit of a rally in the oil market and equities, and Gold has kept a par with those moves.”  Bhar said he believes more stimulus from federal governments is needed to spur the Gold price higher at this point.

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

  • Gold, $1,613.40, Down $0.60.
  • Silver, $28.09, Down $0.10.
  • Platinum, $1,411.70, Up $0.50.
  • Palladium, $586.80, Down $1.20.

 

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