Retails sales fall in May; Futures point to a lower start

American stock futures are pointing to a lower start, and were pushed even lower after a report showed that retail sales fell in May.  Jim Reid of Deutsche Bank said, “In reality, price action is likely to remain unpredictable as we move towards this weekend as position squaring will likely dominate ahead of the Greek election this Sunday.”  The focus is squarely back on Greece in the eurozone, as the latest election could make-or-break the repeated bailout attempts for the troubled country.  Gold recovered from early losses after the retail sales report.

Since 2008, over $6 trillion has been printed as part of money-printing or quantitative easing programs by the central banks of the world.  Further quantitative easing is on all of the “Big Four” (Federal Reserve, European Central Bank, Bank of England, Bank of Japan) central banks’ agendas in the near future.  Many investors assume that further easing is sure to happen, according to Bank of America Merrill Lynch’s Gary Baker.

The central banks seem to know a way to offset the inflation created by money printing, however.  According to the World Gold Council, Gold makes up more than 70% of the reserves of countries like the U.S.A., Germany, Italy, and France.  Kazakhstan is the latest to significantly increase its holdings in the metal, and by the end of the year expects to have holdings up to 20%.  The country has purchased 16.2 tons of Gold through April of this year, and expects that number to be 24.5 tons in the second half of the year.

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

  • Gold – $1,622.50 – Up $8.70.
  • Silver – $29.02 – Down $0.03.
  • Platinum – $1,462.30 – Up $5.90.
  • Palladium – $625.10 – Up $0.90.
Enhanced by Zemanta

Weekly Gold and Silver Market Recap for May 25, 2012

by John Foster. Email John.

Golden Range?:

Concerns out of the Euro zone continued to pull down the euro and strengthen the American dollar this week, thus pulling down prices. Gold in particular has remained relatively fluid within a certain price range of $1,530 to $1,590. However a key price indicator in the short term continues to be $1,600 an ounce. However, euro pressure continues to be in the driver’s seat for prices. An unidentified international dealer said, “If we break above $1,600 and even go higher to confirm the bull trend, we will see more buying.”  Gold’s price drop has been well documented during the past few weeks. Many factors have led to the shift in price. However, in the view of many investors, this is an opportunity, based on a closer look at the numbers. CNBC contributor Dennis Gartman said, “The public is massively bearish, and that tells me it’s time to be bullish.” He added, “Most people don’t think Gold and stocks can go higher together, but I expect to see them trade dramatically higher over the course of the next several months. The trend is now higher.”  Prices of Precious Metals were boosted by news of purchases from the biggest of spenders. Central banks in Turkey, Ukraine, Mexico, and Kazakhstan increased their Gold holdings in April, according to the International Monetary Fund. Commerzbank AG said, “We regard the central banks as a stabilizing element on the Gold market and anticipate increasing buying of Gold.” Lachlan Shaw of Commonwealth Bank of Australia said that early signs of an American recovery, a slowdown in Chinese growth, question marks over United States monetary policy and a sovereign debt crisis brewing in Europe are all keeping the market in a wait and see mode. “Any of these four catalysts can drive prices and investment demand,” he said.

U.S Slow but Steady?:

The United States might experience slower economic growth than previously expected with the end of extended benefits for the unemployed. This might influence some job seekers to accept jobs they otherwise would prefer not to, or give up searching for a job and drop out of the labor force. Andrew Tilton at Goldman Sachs Group Inc. is optimistic about the end of the extended benefits program. He said, “There has been an improvement in the availability of jobs. In a better labor market, people losing their benefits would be more likely to look and to find a job, and less likely to simply drop out.  However, consumer sentiment in the United States rose to its highest point in more than four years in May. Optimism in the air as a healthier economy is beginning to develop. Richard Curtin, head of the University of Michigan’s consumer survey, reflected on how long the consumer sentiment will remain positive. He said, “The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made.” Despite the upheaval in Europe, the United States’ economy continues to push forward. There is concern the debt problems in Europe and China could affect American factory data soon, with the Purchasing Managers Index slowing from 56.0 in April to 53.9 this month. Paul Edelstein said, “We are growing at moderate pace of two to two-and-a-quarter percent, but we have some headwinds that are starting to assert themselves, particularly coming from Europe.” Continue reading

Investors selling Gold to restore portfolios

Once the smoke clears in the eurozone, analysts are suggesting gold prices could start moving back up.  Marcus Grubb, managing director of investment at the World Gold Council, shared his thoughts on future gold prices by saying, “Gold, used an alternative to the U.S. dollar by investors in search of safety, could see a move higher once markets have greater clarity on a resolution to the Greek debt crisis.  As we’ve seen in previous times in this crisis like in 2008, you typically get a shift into gold once it becomes clear what the scenario is going to look like.  At the moment we still don’t know what the scenario will look like.  On the other side, investors have been selling gold as they’ve raised cash weightings, moved into the dollar, invested in Treasurys.  They’ve sold gold in order to repair damage in their portfolios.”

Jim O’Neill Goldman Sachs strategist spoke with CNBC regarding how investors and the market are reacting Europe’s financial mess.  “I can sort of see why people are freaking out.  The U.S. is on the mend, and yet the markets are now obviously worried about the interconnectivity of bank lending because of the unfortunate recent episode of JPMorgan and, of course, the staggering mess in Europe.”  A final election in June will conclude if Greece will stay with or leave the eurozone.  If Greece leaves, it will then initiate its own currency and will have to start paying off the estimated $618 billion debt.

The U.S. May experience a slower economic growth than previously expected with the end of extended benefits for the unemployed.  This may trigger some to accept jobs they otherwise would prefer not to or give up on searching for a job and drop out of the labor force.  Andrew Tilton, at Goldman Sachs Group Inc. is optimistic about the end of the extended benefit program he said, “There has been an improvement in the availability of jobs.  In a better labor market, people losing their benefits would be more likely to look and to find a job, and less likely to simply drop out.”

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

  • Gold, $1,594.30, Up $0.90.
  • Silver, $28.52, Down $0.27
  • Platinum, $1,468.10, Up $6.80.
  • Palladium, $616.40, Up $10.80.
Enhanced by Zemanta