Investors nervous; Spain to request aid

American stock futures are taking a hit this morning, now that investors have had a day to digest the big news from yesterday.  Federal Reserve Chairman Ben Bernanke’s reluctance to acknowledge monetary stimulus had a big impact on market sentiment.  China is expected to release economic data this weekend, and some are worried that yesterday’s interest rate cut in that country could signal disappointing numbers.  David Morrison of GFT Markets wrote that “investors are becoming increasingly jittery as we head into the weekend.  As a consequence, many are taking the opportunity to take some risk off the table and book profits.”  Precious Metals are also trading lower this morning as a result.

Reuters is reporting that Spain could request aid for its struggling banking sector this weekend.  Spain would be the fourth country to appeal to the eurozone for aid during the region’s debt crisis.  According to sources, finance ministers are holding a conference call Saturday, and that is when the request is expected.  A senior German official said that after yesterday’s downgrade of Spain’s sovereign credit rating, “The government of Spain has realized the seriousness of their problem.”

Echoing sentiments from many other pundits, Harvard Professor Martin Feldstein said that Greece’s economy is beyond repair, and that the only option they have left is to leave the eurozone.  “Letting Greece go will be painful in the short run but will be better for Greece, and for Europe, in the long-run,” said Feldstein.

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

  • Gold – $1,576.40 – Down $11.10.
  • Silver – $28.24 – Down $0.38.
  • Platinum – $1,417.90 – Down $25.00.
  • Palladium – $609.40 – Down $16.40.
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Gold in Postive Territory

Precious metals are rising again, largely on safe haven appeal, as concerns in Spain and Greece have not abated and gold imports in China are climbing. HSBC wrote, “Gold prices may be supported by China’s growing appetite for bullion, as imports from Hong Kong climbed to record highs. Furthermore, imports of gold coins, which are reported in a separate category in the trade data, increased significantly to 1,876 kg in April from 5 kg in March. The ability of China to sustain gold imports is impressive, considering that the economy is showing signs that growth is cooling and income growth is moderating.” Meanwhile Commerzbank feels that gold has “regained its safe haven status.”

At the G-7 conference, Spain’s Treasury Minister Cristobal Montoro basically sounded the alarm about how bad the banking situation is in Spain at this time. As the debt gets worse the access to credit to help bail themselves out is becoming more and more detrimental. He even called for European assistance, a departure from what other government officials had wanted, which was to raise the funds itself. Germany is pushing Spain to accept the bailout. In an interview Montoro said, “The risk premium says Spain doesn’t have the market door open. The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.”

Central banks remain squarely in the crosshairs as the main target to appease economic concerns. Federal Reserve Chairman Ben Bernanke is expected to testify before a congressional panel Thursday about the current economic outlook and monetary policy. Chief strategist Michael Derks said, “Policy makers would appreciate that both growth and inflation remain too low, and that financial conditions have the potential to be eased still further. As such, Bernanke and his fellow board members are probably considering a further round of [quantitative easing], coupled with an extension of their forward guidance on monetary policy.”

At 8:02 a.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,617.70 – Up $4.30.
  • Silver – $28.41 – Up $0.32.
  • Platinum – $1,440.80 – Up $11.50.
  • Palladium – $613.50 – Down $0.40.
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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

Markets Fall as Europe Fears Swell

Gold retreated today as Europe continued to fan the flames of fear across the globe.  Markets were in selloff mode, as more than 2/3 of stocks on the New York Stock Exchange lost value and oil fell below $80 a barrel for the first time in eight months.  “Concerns over the prospects of Greece leaving the European Union and the resulting impact on the euro zone’s future economic health had sellers out in force,” said Alan Herbst, a principal at Utilis Advisory Group.

Despite gold’s drop in price recently, many analysts remain bullish on the long-term prospects.  “I remain constructive on gold as a store of value, or an alternative currency, but instead investors are using it as a source of cash or stepping over to go to the more traditional bastions of safety, as in the German bund, the U.S. dollar or Treasurys,”  said Mark Luschini, chief investment strategist at Janney Montgomery Scott. It seems that investors are using gold as an insurance policy, and filing claims to raise their cash positions.

Speculation abounds as to who will be tapped to fill the job of Treasury Secretary once Timothy Geithner steps down after the November elections.  The new secretary will undoubtedly have a full plate of issues to deal with, from a trillion-dollar deficit in the American budget to a debt crisis in Europe and our strategic relationship with China.

At 4 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1562.80, Down $15.30.
  • Silver, $27.86, Down $0.41.
  • Platinum, $1427.40, Down $33.00.
  • Palladium, $596.00, Down $21.60.
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Precious metals continue to ride eurozone train

The concerns out of the eurozone continue to pull down the euro and strengthen the U.S. dollar, 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.”

Greek citizens continue to hold out for hope that money will be found to help bail the country and its citizens. The prevailing feeling is that Europe will not just cut their losses and kick Greece out of the eurozone. An alarming, almost de ja vu-ish feeling permeates through the country as some citizens say, “There’s a lot of money in this country, they just need to tax the rich and it would solve so many problems.” Does that sound familiar? The Greek citizens voice their displeasure through their voting results, with another election coming next month and fears that the drachma will come back.

The issues surrounding Greece do have some impact on the U.S. and should not be taken lightly. There are a few issues in particular including the U.S. banks’ susceptibility to eurozone debt. The weakening power of the euro as a currency could mean that U.S. goods would also become more expensive, diminishing the value of those goods. As well as the global impact that could be felt by other global powers like China.

At 8:01 a.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,579.50 – Down $10.70.
  • Silver – $28.29 – Down $0.12.
  • Platinum – $1,460.90 – Down $2.60.
  • Palladium – $613.70 – Up $0.90.
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Gold’s long term endurance touted; America records budget surplus

The Gold price has dropped to a low not seen since 2008. When this happened in the past, it made investing in the Precious Metal a great opportunity. The short-term outlook does not seem to show much change, as long as the situation in Europe continues and the United States’ economy keeps moving upward. However, “On a long-term basis, Gold has a place in most investment portfolios for two reasons: We foresee demand returning from emerging markets, and more and more investors buy Gold as a hedge against inflation,” said Sanjeev Sardana, financial adviser and chief executive officer of Bluepointe Capital Management.

The 13-year stretch of growth in China seems to be losing momentum. Reports of China’s industrial production and retail sales missing forecasted numbers are major factors. The People’s Bank of China is adding about 400 billion yuan into the banking system by cutting reserve requirements. The current interest rates have also raised concerns. “Chances of an interest-rate reduction are still small at the moment,” said Lu Ting, a Hong Kong-based economist.

Something happened in the United States for the first time since 2008. In April, the Treasury Department recorded a $59 billion surplus. Even with this good sign, it is not expected to last. The Treasury is facing a $1.33 trillion deficit for 2012. It is less than last year’s number, but far from positive enough to give investors the confidence they need.

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold – $1562.40 – Down $23.10.
  • Silver – $28.38 – Down $0.59.
  • Platinum – $1444.40- Down $28.00.
  • Palladium – $595.10 – Down $9.30.
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Have people tried selling fake items to APMEX?

Picture of a genuine American Silver Eagle and...

Picture of a genuine American Silver Eagle and a counterfeit Morgan Dollar manufactured from Nickel Silver. The counterfeit coin was sourced in Thailand, 2007. (Photo credit: Wikipedia)

We have a very active community on our facebook page and we recently had a customer post the following question on the page. He asked, “APMEX, I am curious. How often do you observe counterfeits being sold off to you?” We connected with G. Miguel Perez-Santalla, vice president of purchasing at APMEX Inc., for a response to this question.

“In essence, fakes among general bullion products are very low. This is due to the fact that premiums are much lower and the profit from creating fakes is much less profitable. The biggest danger in bullion products lies in the large bars where theoretically they can be drilled and filled with another metal. However, our experts here are able to catch counterfeits and we melt and destroy all counterfeit items that reach our vaults” Perez-Santalla said. He also said the chances of finding a fake large bar remain low due to the difficulty in creating the correct weight with another metal and still keeping its proper dimensions.

The Level One scam to watch out for involves coins that are completely fake and are only plated with the real metal. At APMEX, we see a very low instance of Level One scams, however people should exercise caution when shopping on websites like Craigslist. There are also counterfeit coins that are made of real precious metal, which is more common.

There are more and more counterfeits making their way into the market that are purportedly being manufactured in China, including pre-1933 American Gold coins and slabbed coins, as well.  Many of them are very good, and the numismatic community is working very hard to create safeguards to defend the industry and the public.

“The bottom line, and this is a very rough number, compared to the volume of product in the marketplace, the amount that makes it to us is less than 1 percent overall. And when they reach us, we destroy them. Hence, this decreases the existence of fakes in the market. Just like the U.S. Treasury destroys the counterfeit banknotes, we destroy the coins or any fake product so that the public is protected,” Perez-Santalla said.

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