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. Continue reading