The global increase in demand for physical Gold began in the fourth quarter of 2012 and continued into the first quarter of 2013 as the aggregate metric tons of physical Gold taken by bar and coin buyers increased from approximately 336 tonnes to approximately 377 tonnes, an increase of over 12%. Physical Gold bar and coin demand in the United States grew from approximately 17 tonnes in the fourth quarter of 2012 to approximately 20 tonnes in the first quarter of 2013, an increase of approximately 22%.
Disappointing data from the monthly United States jobs report is the latest news to cause concern over the American economy and prompt a spike in Precious Metals prices. The continued lack of stronger economic statistics is propelling the anticipation of further monetary easing by the Federal Reserve. Economist Mark Zandi described the sentiment of the individual worker, stating, “They (workers) are still feeling pretty awful. They recognize that we’ve made progress, that we’ve gone from losing a boatload of jobs to seeing some growth, but that’s very little solace in the context of an (8.1 percent) unemployment rate.”
Central banks from nations around the globe have been amassing sizable Gold reserves in recent years as a reaction to the global financial crisis. The World Gold Council recently announced that Russia has doubled its stockpile in the past five years by purchasing a half-billion dollars’ worth of Gold every month. If the Fed announces further quantitative easing and world economic leaders such as Russia continue accumulating large quantities of Gold, the price of the yellow metal is likely to continue its upward climb.
At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1,738.30, Up $33.70.
- Silver, $33.68, Up $1.01.
- Platinum, $1,593.30, Up $5.90.
- Palladium, $654.40, Up $6.70.
Gold waited all week for direction:
As the week started gold and other markets had all eyes on a small town in Wyoming called Jackson Hole. That is where an annual meeting is held by the U.S. Federal Reserve and in the past has given way to significant monetary action such as two rounds of easing. There was a lot of speculation and waiting for news. For some, it was not going to be an extraordinary event. Many financial specialists believe the Jackson Hole meeting will not be the critical event that could trigger further government financial stimulus this time around. “The critical period is really from Friday to the 12th (of September) — the constitutional court decision,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vt. Many others shared a different view of the meetings of the Fed. While the question remains whether there will be another round of monetary easing, if the answer is “no,” it could affect Gold’s price. “We see near term risks of a reversal if Jackson Hole does not deliver what the market is hoping for,” said Nick Trevethan, senior metals strategist at ANZ in Singapore. Friday came and so did the report with Federal Reserve Chairman Ben Bernanke giving indications that the Fed will soon embark on another round of bond buying, otherwise known as quantitative easing (QE). “It is important to achieve further progress, particularly in the labor market,” Bernanke said. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” Bernanke cited previous rounds of easing as effective in stimulating economic development and job creation without hastening inflation.
Europe still trying to work through issues:
Europe clearly took a backseat this week to the Fed’s potential monetary easing announcement, but the European Central Bank (ECB) is readying for an ECB Governing Council meeting next week. James Reid of Deutsche Bank said, “For now, Europe is in a holding pattern ahead of clarity surrounding the next move in the great ECB bond buying maneuverings, and the U.S. is in limbo ahead of Bernanke’s Jackson Hole appearance tomorrow. For the latter, speculation mounts that Bernanke won’t say anything overly new in his speech.” The eurozone is in a battle of its own, regardless of what the Fed decides. 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 June elections. Private sector deposits are up about 2 percent. 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.”
United States economy still giving mixed reports:
In the U.S.A., a trend of economic growth could be a reason the announcement of another round of easing by the Federal Reserve was not made today. One discussion is surrounding the small amount of growth and whether it is enough to sustain a positive direction moving forward. The United States’ gross domestic product (GDP) went up in the second quarter by 1.7 percent, which was 0.2 percent more than a previous estimate. The GDP is seen as a key indicator of the economy. While there was improvement, many believe it was at a level low enough to warrant more action by the Fed. The release of the weekly jobless claims report has had little effect on Gold and Silver. The four week moving average of new claims rose by 1,500, while the week to week change was flat. Personal consumer spending increased in July to a five month high, according to data from the Commerce Department. Falling gasoline prices coupled with moderate increases in income to provide consumers a bit more to spend this midsummer. Despite July’s increase, consumers have been cautious on spending for most of the year, with a decrease in June and a flat report in May. “In the first quarter of the year, Americans saved less in order to spend more,” said Chris Christopher, senior economist at IHS Global Insight. “In the second quarter, job prospects were not very promising, so Americans put more money aside and spent less.”
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.
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The primary topic of discussion today will be the release of the minutes from last week’s Federal Reserve meeting. Ahead of that announcement, speculation will abound. Some investors will want more quantitative easing, while others will want more of what we have been getting: inaction. Speaking on CNBC, Art Cashin, director of floor operations at USB, said, “You’re going to need a translator for these minutes.”
The Gold price hit a three month high in overnight trading, going as high as $1,645. Since 2009, central banks have been net buyers of Gold, regardless of the spot price. According to the World Gold Council, central banks bought 158 tons in the June quarter. The ever present eurozone crisis and never improving American financial situation has presented central banks across the globe with a situation in which the yellow metal is the perfect safe haven for their currency reserves.
At 9:09 a.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1,640.40, Down $1.00.
- Silver, $29.48, Down $0.06.
- Platinum, $1,522.00, Up $13.20.
- Palladium, $631.50, Up $5.80.