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.

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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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Gold prices are on the move

FRANKFURT AM MAIN, GERMANY - SEPTEMBER 27:  Th...

(Image credit: Getty Images via @daylife)

Precious Metals continue to move upward as investors continue to view the recently released Federal Reserve policy meeting minutes in a positive light.  Hopes continue to grow that the Fed will take some action soon to boost the economy. “The default action has changed from do nothing to do something,” Mitsui Precious Metals analyst David Jollie said. “This means that we can expect to see some action soon, but the latest minutes imply the Jackson Hole and the September 12-13 meetings are not likely to see QE3 launched.”   The Platinum price is still feeling the effect of labor interruptions as clashes between the police and striking miners in South Africa have reached a death toll of 44 people.

Spain has begun negotiations with eurozone partners over the requirements necessary to lower its borrowing costs, but has stopped short of requesting an official bailout.  The strategy currently in favor includes a combined attack by the European rescue fund (EFSF) and the European Central Bank (ECB) purchasing Spanish debt in the primary and secondary markets.  Spain’s borrowing costs are at record levels since the launch of the euro 13 years ago.  “Negotiations have started and are well under way. Right now the preferred option, the one that is being actively discussed, is for the EFSF to buy bonds on the primary market and for the ECB to buy bonds on the secondary,” one of the sources told Reuters on condition of anonymity.

Concerns over Europe and its debt situation are dragging on US stocks, with the S&P 500 heading to a weekly decline. “People aren’t willing to invest,” said Stephen Hammers, the chief investment officer at Compass EMP Funds. “If Europe gets worse, U.S. investors will see that as a warning sign.”  Adding to the concern are comments from German Finance Minister Wolfgang Schaeuble stating that giving Greece more time would not solve its problems and cost investors.

At 1:00 p.m. (EDT), the APMEX

Precious Metals spot prices were:

  • Gold, $1,674.00, Up $35.00.
  • Silver, $30.72, Up $1.08.
  • Platinum, $1,557.70, Up $30.20.
  • Palladium, $657.50, Up $27.30.
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HSBC Predicts Gold to Rally above $1900 in 2012

 

In a report just released from HSBC Bank, “Economic uncertainty, geopolitical tensions and the uncertainty of the U.S. November elections are theoretically gold-bullish, and gold should perform better later in the year when U.S. growth is poor and the dollar is weak.” The report further stated that “We expect prices to rally to above $1,900/oz by the end of the year. Patience is the most important commodity.”

Gold is up slightly in early morning trading as the U.S. dollar index hit a one month low. The positive jobs report on Friday increased the appetite for risk and therefore put downward pressure on the U.S. dollar. There is much speculation that during the September Federal Open Market Committee further monetary easing will be announced. For now, gold remains in a fairly tight trading pattern while trying to decipher the direction of the global economies.

Spain is staying in the spotlight and the question is being asked of how much bailout they will actually need. At the moment, efforts are being made to stop the bleeding, but it is uncertain whether or not they will save the patient. The credit ratings make it very difficult for institutional investors to invest in Spain. There are concerns that this could turn into the same pattern as Greece, where smaller bailouts eventually turned into a full-fledged bailout.

At 9AM EDT the APMEX precious metals prices were:

  • Gold price – $1,1610.00  – up $2.70
  • Silver price – $27.80 – down 11 cents
  • Platinum price – $1,397.00 – down $17.40
  • Palladium price – $577.60 – down $1.60

 

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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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