Weekly Recap 11.11.11

The fallout over the Greek prime minister’s resignation and continuing concerns over Italy’s political situation continue to permeate markets across the globe. “Gold is resuming its role as a safe-haven investment because of the problems in Europe,” said Donald Selkin, chief market strategist at National Securities Corp.  “It has also found good support from physical purchase.” The stock market “appears to be in no-man’s land and at the mercy of Europe’s news flow,” said senior strategist Alan Gayle of RidgeWorth Capital Management.

The times are extremely tricky in Greece, with Prime Minister Papandreou’s resignation and a coalition of leaders expected to push through the bailout.  This will be a monumental task, considering that the coalition has just four months before new national elections. Signs point to an uneasy transition, as opposition leaders are already skipping meetings.  Former Greek Finance Minister Stefanos Manos said, “The new prime minister will … not give the impression that he is in charge.  Everyone will be  looking to the two party leaders who will be running things behind the scenes. … The civil service won’t implement any decision, and everyone will be waiting for the election.”

“The daily battle is headlines from Europe (and) short-term profit taking, which keeps gold’s progression higher in check,” said Jeff Wright, managing director at Global Hunter Securities.  Among the other positive factors for Gold prices, Wright lists the budget crisis in the U.S., the devaluation of the dollar, and the fact that Gold prices are above the 50-day moving average. Wright added, “The solutions to Greece (and) Italy are all inflationary in nature; inflation is supportive of Gold as it erodes the value of currencies.”

The European news on Friday surrounded the impending resignation of Italian Prime Minister Silvio Berlusconi now that Italy has passed its austerity legislation.  The popular choice to assume leadership among Italian leaders is Mario Monti, a former EU competition commissioner.  Even with Berlusconi’s resignation, Italy’s problems will prove to be a tough fix.  Mario Baldassarri, chairman of the Senate Finance Committee, said, “The key political point for Italy is now answering the following question: Which government, with what wide majority, will be able to implement in a few days the structural reforms that we haven’t been able to
implement in the last 10 years?”

Christine Lagarde, managing director of the International Monetary Fund, said in a speech this week in Beijing, “If we do not act, and act together, we could enter a downward spiral of uncertainty, financial instability, and a collapse in global demand. Ultimately, we could face a lost decade of low growth and high unemployment.”  Her speech comes at the same time that European leaders are appealing to the Chinese government for aid in shoring up debt-ridden nations in the euro zone.  The remarks of a “lost decade” are a reference to Japan’s economic problems of the 1990’s, in which itbattled deflation, mounting debt, and painfully slow economic growth.  The origins of Japan’s lost decade are eerily similar to what the world faces today: massive debt and a bursting real estate bubble.

With the news about Italy, Greece and the euro zone, the U.S. and its pending financial crises have been pushed to the back burner.  This doesn’t mean the U.S. isn’t suffering from some current major economic issues.  Mohamed El-Erian, co-CEO of Pimco, spoke with CNBC about those issues.  “We used all of the wrong bullets.  We tried to throw money at the problem.  The issue is not money, the issue is that what we have are structural impediments, and structural challenges need structural  solutions.”  He went on to list the top five issues plaguing the U.S economy: housing, unemployment, public finances,  infrastructure and a clogged credit market.  He also stated, “Until we get movement on those five things, we’re at stall speed.”

Weekly Spot Prices

Spot Gold prices opened this week at $1,791.40. The high was on Tuesday, Nov. 8th at $1,804.40, while the low for the week occurred on Thursday, Nov. 10th at $1,736.60. Gold ended the week down $0.40 at $1,791.00. This week, the most popular Gold bullion products were 2011 Gold American Eagles, 1 oz. Pamp Suisse Gold Bars, and 2011 1 oz. Gold Maple Leafs.

Spot Silver prices opened this week at $34.89. Silver reached a high of $35.35 on Tueday, Nov. 8th, while this week’s low for Silver occurred on Thursday, Nov. 10th at $33.13. Silver ended the week down $0.22 at $34.67. The most popular Silver products on APMEX.com this week were 2011 Silver American Eagles, 2011 Silver Maple Leafs, 1 oz. Silver Buffalo Rounds and 10 oz. APMEX Silver Bars.

Spot Platinum prices opened this week at $1,660.00 and ended the week down $12.90 at $1,647.10. Popular Platinum products this week included, 1 oz. Platinum Bars, 1/10 oz. Platinum American Eagles, and 1 oz. Platinum American Eagles.

Spot Palladium prices opened this week at $661.50 and ended the week up $1.50 at $663.00. Palladium investors preferred 1 oz. Pamp Suisse Palladium Bars and Palladium Canadian Maple Leafs this week at APMEX.

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