Weekly Gold and Silver Market Recap for March 9, 2012

Resolution of Greece’s latest debt problems and stronger-than-expected US employment data help Gold prices

by Craig C. Calvin. Email Craig.

Last week, the Gold price fell sharply in response to testimony by Federal Reserve Chairman Ben Bernanke before Congress that indicated seemed to quell chances of another round of quantitative easing from the Fed. However, a Wall Street Journal report this week indicated that the Fed was looking at an alternative bond-buying program, and investors responded by turning to the safe haven of Gold out of inflation fears. Easing in the past has been associated with increased inflation here in the U.S. as the buying power of the dollar drops. Gold and other precious metals historically have had a negative correlation with the value of the dollar. This week, legendary money manager Marc Faber, affectionately known as “Dr. Doom,” advised investors to buy precious metals. Faber told Reuters, “Political risk was high six months ago, and it is higher now. I think sooner or later, the U.S. or Israel will strike Iran.” He continued, “Say war breaks out in the Middle East or anywhere else; Mr. Bernanke will just print even more money — they have no option. … They haven’t got the money to finance a war.”

This was a very important week for Greece, as private bondholders had to decide to what extent they would participate in the Greek bond swap initiative designed to cut an estimated 100 billion euros from Greece’s debt and avoid a disorderly and potentially contagious default. Some hedge funds considered refusing to join the swap, and even threatened to take legal action if Greek policymakers didn’t offer them a better deal. By Friday, however, the bond swap was a done deal. More than 83 percent of the bondholders agreed to the swap, and now Greece is in a position to force the remaining bondholders to accept the deal. This is the largest debt restructure in history, and although there is great uncertainty surrounding the Greek crisis, there will not be a default for the time being.

Here in the U.S., economic data released on Monday showed that new orders for factory goods dropped in January by 1 percent, while the rate of growth in the U.S. services sector increased in February to an index reading of 57.3 from January’s index reading of 56.8. These numbers represent positive progress in the U.S.  On Tuesday, the U.S. stock market closed down more than 200 points, its biggest loss of 2012, over fears of a Greek default is rocking the stock markets and precious metals markets. Wednesday saw the release of the ADP private-sector jobs report, which showed that 216,000 private-sector jobs were added in February, much in-line with consensus forecasts. New claims for unemployment benefits took a surprising turn upward for the previous week, increasing by 8,000. The jobs report for February that was released on Friday of this week came in slightly better than expectations. Economists had projected a net of 210,000 new jobs, and the number reported was 227,000. Also on Friday, news that the U.S. trade gap widened to a three-year high, as imports reached an all-time high. Economic growth generally will decline as a result of fewer exports.

President Barack Obama and Israeli Prime Minister Benjamin Netanyahu met in Washington at the start of the week to discuss Iran. Some agreements emerged, but Netanyahu did not agree to hold off possible military strikes against Iran, even though such a decision has not been made. The two leaders did agree to see how financial sanctions would work against Iran. Meanwhile, in an attempt to soothe the tensions between Israel and Iran, talks resumed between the two countries. The major bone of contention continues to be Iran’s nuclear ambitions. Israel is seeking U.S. arms support in the event of a strike against Iran. President Obama did reassure Israel’s prime minister that the U.S. is keeping military options open and stated that the U.S. “has Israel’s back.”

China announced this week that it is lowering its economic growth target for 2012 to 7.5 percent, the lowest level in seven years. China’s intentions are to allow Beijing to create stability for its economy and to resolve price pressures without an inflation spike before new leadership is put in place later this year. U.S. stock prices immediately dropped in response to the news. In other news related to China this week, President Obama signed a bill that is quite unpopular with the Chinese Commerce Ministry. In an effort to protect American jobs, the bill authorizes duties to be imposed on subsidized goods from China and Vietnam.

Weekly Spot Prices

APMEX Spot Prices

Product of the Week

2012 1 oz Silver Australian Koala

2012 1 oz Silver Australian Koala

In 2007, the Perth Mint of Australia began minting a beautiful bullion coin: the Silver Koala. These Silver coins celebrate the symbolic marsupial of Australia. Due to the variety of designs on the Silver Koala coins, they have become one of the country’s favorite collectibles and are gaining popularity around the world!

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The Perth Mint originally began in 1899 as a branch of Britain’s Royal Mint to help supply the Gold sovereigns and half sovereigns, which were used as everyday circulating coins throughout the British Empire. In 1970, control of the mint passed from Britain to the Western Australian Government, which still owns it to this day.

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