APMEX Weekly Report

Gold Remains in Demand:

The headlines this week have been dominated by the struggles of the global economy and the uncertainty of investment options. However, Gold has shown to be a steady option recently. “Gold (is one of the most liquid ways) to get exposure to inflation. The volatility… will remain low going forward as the ugly head of inflation will emerge, and we will see a steady increase in gold demand,” said Michael Mullaney, at Fiduciary Trust in Boston.  With questions regarding the United States’ economic future and the global economic slowdown, many investors are left looking for a solid investment.  Though Gold fell this week, open ended fiscal policies engaged in by central banks are expected to boost prices in the long run. Credit Suisse forecast an average price of $1,840 per ounce for the year 2013. HSBC’s James Steel stated that he does not predict Gold to fall below $1,750 per ounce. Historically, price pullbacks such as this have presented excellent buying opportunities for investors.


How Steep is the Fiscal Cliff:

Despite recent strong gains in the U.S. stock market, investors braced for the worst earnings season since 2009. Analysts are expecting earnings to decline, after 11 quarters in a row of gains. These poor results are attributed to the slower than expected U.S. economic recovery and the overall economic slowdown worldwide.  Americans are also expecting the worst for the end of 2012 when the United States government is forced to deal with scheduled spending cuts and tax increases, referred to as the “fiscal cliff.” Spending cuts will disrupt more than 1,000 mandated government programs. Tax assistance laws put into place by the Bush administration and extended during the Obama administration are set to expire Dec. 31, 2012. It is predicted that the economy could be heading towards another recession if it is not handled properly and in a timely manner. Chad Stone at the Center on Budget and Policy Priorities believes the circumstances may not be so severe with the “fiscal cliff” acting more like a “fiscal slope” that the economy can easily recover from. Stone said, “The slope would likely be relatively modest at first. A relatively brief implementation of the tax and spending changes required by current law should cause little short term damage to the economy as a whole.”  The main point of emphasis is the tax cuts that are set to expire at the first of the New Year. If they are allowed to expire without any action, the effects could be felt worldwide. “It’s very clear that if the whole tax package moves off the table it will immediately bring the U.S. into a recession, which will have a huge negative impact on the whole world,” said Zhu Min, deputy managing director of the International Monetary Fund.


Greek Debt May Need More Work:

German Chancellor Angela Merkel’s words of support for Greek Prime Minster Antonis Samaras were overshadowed this week by new data indicating that Greece’s debt situation may require yet another round of restructuring. The International Monetary Fund (IMF) warned Eurogroup finance ministers that Greece will miss the five year debt reduction target required for its 130 billion euro bailout. The IMF also has concerns that it will be nearly impossible to get the Greek debt level below the 120 percent of economic output by 2020 as hoped. Chancellor Merkel’s visit to Greece, the first since the debt crisis began in 2009, saw significantly increased security as Greek protesters took to the streets to vent their anti-German sentiment.  Chancellor Merkel’s call for austerity measures is not popular with the Greek populace. Greece prepared for two days of strikes with over 7,000 plainclothes police and hundreds more undercover agents.