Precious metals, although higher today, are still experiencing a lot of volatility

Precious metals, although higher today, are still experiencing a lot of volatility through the day due to concerns growing over the eurozone debt crisis. Though risk remains elevated in the eurozone gold is holding steady. Domestic and sovereign concerns are hinged on central banks’ offerings of support. Analyst David Wilson said, “(Federal Reserve Chairman Ben) Bernanke, in comments made to the Congress committee last week, seemed to be intimating that QE was off the table… But I wonder (whether) if Europe continues to drag, the likelihood of QE continues to grow… That in itself should be supportive for gold.” Meanwhile in a note to investors Commerzbank wrote, “So far the financial aid promised to Spanish banks has failed to have its desired effect. On the contrary, the sell-off of Spanish and indeed Italian government bonds continues… The sovereign debt crisis can be expected to keep the markets on tenterhooks for quite some time yet and cause demand for gold to pick up again — not only among retail investors.”

Alex Tsipras is still viewed as a front runner in this weekend’s Greek elections. He also feels that the European Union does not want to kick Greece out, even after repealing the austerity measures inflicted for the bailout the country has already received. He said, “We have no sense that European partners will follow this tactic of blackmail heard from some quarters and stop funding… Something like that would be catastrophic not only for Greece but for the entire euro area… We want to simply convince our partners that it’s in the interests of all to stop sending EU taxpayers’ money into a bottomless pit. This money should be used properly in a program that is effective and not on a memorandum that has failed.” The Greek people are making a run on the banks ahead of these elections, causing more of an economic strain on an already tenuous situation. Tsipras spoke to this topic as well when he said, “To stop these outflows, this hemorrhage from the financial system, it is imperative to have support from all political sides that we’re working to stabilise the Greek economy. This scare-mongering on Greece leaving the euro must stop.

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

  • Gold – $1,618.10 – Up $4.30.
  • Silver – $28.88 – Down $0.17.
  • Platinum – $1,466.00 – Up $9.60.
  • Palladium – $618.80 – Down $5.50.
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Bailout accepted by Spain

Gold and Silver prices both opened higher Sunday on the announcement this past weekend that Spain agreed to a $125 billion (American dollars) bailout. The devil is always in the details, and although the details of this agreement are still unknown, both equity and Precious Metals markets have reacted favorably. The money will go to struggling Spanish banks. It is hoped that this infusion of capital will revive Spain’s financial system.

Now that a bailout has been accepted by Spain, the focus will shift to the approaching Greek election. The Greeks will decide Sunday whether they will remain in the European Union, thereby holding together the eurozone. On May 6, elections were held with neither party being able to form a government, so a new election was scheduled for June 17. The pro-bailout New Democracy party is slightly in the lead, but it is still unknown whether that party will be able to form a coalition if it wins the election.

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

  • Gold, $1,595.80, up $4.40.
  • Silver, $28.74, up $0.18.
  • Platinum, $1,454.30, up $27.20.
  • Palladium, $623.00, up $11.00.

APMEX End of Week Report for 6/8/2012

Bernanke Speaks:

Official portrait of Federal Reserve Chairman ...

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

Gold has had ups and downs this week. The market has many investors questioning the long term outlook for Precious Metals.  As with all investments, there will be unknown factors.  At present, there is the European economic crisis, the Chinese economic slowdown, and underachieved goals for a better American economy. With these situations being in play, it could signal good news for investors. Dennis Gartman, author of The Gartman Letter, said, “The trend for Gold is still from the lower left to the upper right. I think that you want to own Gold in dollar terms; I think you want to own Gold in euro terms; I think you need to own Gold in yen terms. And quite honestly at this point, given the economic circumstances, I think you’d like to be long of gold and short the stock market.”  There was a lot of cautious optimism bubbling ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress this week.   Global strategist Dan Greenhaus said, “There’s just been, for the last 48, 72 hours, a growing feeling that a 10 percent decline in the stock market is as deep a decline as you would get with Ben Bernanke lurking tomorrow.” He also added, “The fate of the market in the next couple of days is in Ben Bernanke’s hands, and it’s over his interpretation of the state of the economy.”  That interpretation wasn’t as clear as some would hope, as Chairman Bernanke refused to tip his hat regarding any new stimulus package.  Bernanke indicated that while the central bank is willing to protect the economy from “worsening,” he did not specify what actions (if any) the Fed would take. “The Gold bulls are desperately hoping for further mention of some form of stimulus from the Fed,” said David Govett of Marex Spectron. “If some form of this is put on the table, then I expect Gold will react very positively. If however, as I personally believe, the Fed leaves things as they are for the time being, this will be viewed as negative and Gold will fall.”

Spanish Debt Downgrade:

MADRID, SPAIN - MARCH 30:  Spain's Minister of...

MADRID, SPAIN – MARCH 30: Spain’s Minister of Treasury and Civil Services Cristobal Montoro Romero unviels Spain’s budget for 2012, during a press conference at the Moncloa Palace on March 30, 2012 in Madrid, Spain. The budget for 2012, which comes in the wake of a 24-hour general strike, includes over 27 bn euros in savings. (Image credit: Getty Images via @daylife)

At the G-7 conference this week, Spain’s Treasury Minister Cristobal Montoro sounded the alarm about how bad the banking situation is in Spain at this time. As the debt gets worse the access to credit to help bail themselves out is becoming more and more detrimental. He even called for European assistance, a departure from what other government officials had wanted, which was to raise the funds itself.  In an interview Montoro said, “The risk premium says Spain doesn’t have the market door open. The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.” That problem grew later in the week when ratings agency Fitch downgraded Spanish debt from A to BBB on concerns that the country will need a bailout package to avoid economic disaster. Furthermore, Fitch’s outlook is negative, which means that more downgrades are likely.  German Chancellor Angela Merkel reacted by reiterating Germany’s commitment to helping its weaker eurozone partners. “It is important to stress again that we have created the instruments for support in the eurozone and that Germany is ready to use these instruments whenever it may prove necessary,” she said.

Germany Holding the Reigns:

Germany appears to be willing to trade a greater role supporting its indebted EU partners for more centralized control over government spending in member nations. While

Deutsch: Dr. Angela Merkel Bundeskanzlerin der...

Deutsch: Dr. Angela Merkel Bundeskanzlerin der Bundesrepublik Deutschland Vorsitzende der CDU Deutschlands (Photo credit: Wikipedia)

continuing to stay away from the idea of “eurobonds,” there is growing interest in pooling the bad debt with a payoff timetable of 25 years. “The world wants to know how we expect the political union to complement the currency union,” German Chancellor Angela Merkel said. “We have to find an answer in the foreseeable future.” In comments later this week Chancellor Angela Merkel said that Germany will use all the tools it has available to support the 17-nation eurozone. “In view of the current difficulties, it’s important to emphasize that we have created the instruments of support in the eurozone, that Germany is ready to work with these instruments whenever that is necessary, and that this is an expression of our firm desire to keep the euro area stable.”  Merkel, however, has not backed off her rejection of debt sharing or access to euro bailout funds for Spanish banks.

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Gold price dips as Fed Chairman testifies

The Gold price has taken a tumble in midday trading as Federal Reserve Chairman Ben Bernanke refused to tip his hat regarding any new stimulus package. Bernanke indicated that while the central bank is willing to protect the economy from “worsening,” he did not specify what actions (if any) the Fed would take. “The Gold bulls are desperately hoping for further mention of some form of stimulus from the Fed,” said David Govett of Marex Spectron. “If some form of this is put on the table, then I expect Gold will react very positively. If however, as I personally believe, the Fed leaves things as they are for the time being, this will be viewed as negative and Gold will fall.”

Bernanke’s testimony to the Joint Economic Committee highlighted many of his concerns without much substance on how the central bank might act. Bernanke also warned lawmakers that “a severe tightening of fiscal policy at the beginning of next year that is built into current law — the so-called fiscal cliff — would, if allowed to occur, pose a significant threat to the recovery.” Next up will be the Federal Open Market Committee meeting June 19-20, which is expected to deal with slowing employment growth.

German Chancellor Angela Merkel has said that Germany will use all the tools it has available to support the 17-nation eurozone. “In view of the current difficulties, it’s important to emphasize that we have created the instruments of support in the eurozone, that Germany is ready to work with these instruments whenever that is necessary, and that this is an expression of our firm desire to keep the euro area stable,” the chancellor said.  Merkel, however, has not backed off her rejection of debt sharing or access to euro bailout funds for Spanish banks.

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

  • Gold, $1,591.60, Down $40.10.
  • Silver, $28.73, Down $0.85.
  • Platinum, $1,444.20, Down $27.00.
  • Palladium, $625.00, Down $7.80.
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Credit Dries Up for Spanish Banks

Spain may be required to accept a bailout soon as the country’s Treasury Minister told Spanish radio listeners today that it’s “technically impossible” for Spain to bail itself out. Spanish banks are suffering from an overload of debt from the country’s bursting housing bubble that was fueled by cheap interest rates after Spain joined the eurozone. Bond yields on Spanish sovereign debt have tipped near the 7% mark that signals markets are anticipating a default, and have been trading at 5.48% premium to safe-haven German bonds, indicating reluctance to loan the government more and more money. Spain will attempt to issue $2 billion more euros in debt on Thursday, which will be a test of market sentiment.

Famed hedge fund manager George Soros estimates Europe has three months to address the crisis. “The heavily indebted countries need relief on their financing costs. There are various ways to provide it but they all need the active support of the Bundesbank and the German government,” Soros said. “Nothing can be done without German support.” While he does not expect a full-blown collapse of the euro, Soros expects Germany’s economy to weaken and the resolve of German citizens to soften to the point that they will be increasingly resistant to assist with further bailouts. Soros, a noted gold bug, rose to fame in the early 1990’s by betting against the British pound, earning him the title, “The Man Who Broke the Bank of England.”

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

  • Gold, $1,617.60, Up $4.20.
  • Silver, $28.57, Up $0.48.
  • Platinum, $1,437.20, Up $7.90.
  • Palladium, $624.30, Up $10.30.
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