Gold slightly higher

American stock futures are mostly flat this morning, with many investors seemingly unsure how to react to recent developments in Europe and the U.S.A.  David Morrison of GFT Markets said, “As we have seen many times recently, the previous day’s price action has been reversed in early trading.  Yesterday we saw stocks rally” as a result of J.P. Morgan’s CEO testifying before the Senate Banking Committee.  However, stocks “then tumbled after an auction of U.S.A. 10-year Treasuries,” added Morrison.  While investors believe stocks may not be the safest place for their money, Morrison explained, “An increasing number are coming to the opinion that this continued flight into U.S.A. Treasuries despite pathetic yields is a very bad sign indeed.”  Gold could benefit from this realization, as the metal has historically been a safe haven investment in times of uncertainty.

At a recent bond auction, the yield on 10-year bonds in Spain rose above 7 percent, which was the trigger point for Greece, Ireland, and Portugal when those countries requested aid from the European Central Bank.  Moody’s Investor Service cut Spain’s credit rating by three notches, and now rests one level above junk status.  The pressure is on German Chancellor Angela Merkel to come up with a solution, but she recently shot down what she termed “miracle solutions,” calling them counterproductive and said that they would violate the German constitution.

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

  • Gold – $1,627.50 – Up $8.10.
  • Silver – $29.01 – Down $0.03.
  • Platinum – $1,486.80 – Up $18.00.
  • Palladium – $625.00 – Up $1.80.
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Precious metals, although higher today, are still experiencing a lot of volatility

Precious metals, although higher today, are still experiencing a lot of volatility through the day due to concerns growing over the eurozone debt crisis. Though risk remains elevated in the eurozone gold is holding steady. Domestic and sovereign concerns are hinged on central banks’ offerings of support. Analyst David Wilson said, “(Federal Reserve Chairman Ben) Bernanke, in comments made to the Congress committee last week, seemed to be intimating that QE was off the table… But I wonder (whether) if Europe continues to drag, the likelihood of QE continues to grow… That in itself should be supportive for gold.” Meanwhile in a note to investors Commerzbank wrote, “So far the financial aid promised to Spanish banks has failed to have its desired effect. On the contrary, the sell-off of Spanish and indeed Italian government bonds continues… The sovereign debt crisis can be expected to keep the markets on tenterhooks for quite some time yet and cause demand for gold to pick up again — not only among retail investors.”

Alex Tsipras is still viewed as a front runner in this weekend’s Greek elections. He also feels that the European Union does not want to kick Greece out, even after repealing the austerity measures inflicted for the bailout the country has already received. He said, “We have no sense that European partners will follow this tactic of blackmail heard from some quarters and stop funding… Something like that would be catastrophic not only for Greece but for the entire euro area… We want to simply convince our partners that it’s in the interests of all to stop sending EU taxpayers’ money into a bottomless pit. This money should be used properly in a program that is effective and not on a memorandum that has failed.” The Greek people are making a run on the banks ahead of these elections, causing more of an economic strain on an already tenuous situation. Tsipras spoke to this topic as well when he said, “To stop these outflows, this hemorrhage from the financial system, it is imperative to have support from all political sides that we’re working to stabilise the Greek economy. This scare-mongering on Greece leaving the euro must stop.

At 5:01 p.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,618.10 – Up $4.30.
  • Silver – $28.88 – Down $0.17.
  • Platinum – $1,466.00 – Up $9.60.
  • Palladium – $618.80 – Down $5.50.
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Gold prices holding steady

With all the negative global economic news being reported, Gold is holding steady. While the news from Europe and its global effects seem to dominate the headlines, Gold is quietly holding its place. The larger question is not the situation in Europe, but how that might affect the United States economy. “(Federal Reserve Chairman Ben) Bernanke, in comments made to the Congress committee last week, seemed to be intimating that QE was off the table, but I wonder if, (as) Europe continues to drag, the likelihood of QE continues to grow. That in itself should be supportive for Gold,” Citigroup analyst David Wilson said.

Talk in Europe has focused on Greece and the major economic turmoil unfolding. There has been talk of an exit from the European Union by the Greeks. However, Vitor Constancio, vice president of the European Central Banks, says such a move would have a dire outcome. “I cannot imagine a country to leave the euro and survive. For that country (Greece) in particular, it would be catastrophic.”

Reports released today showed retail sales fell for the second straight month in the United States. Taking that information and adding it to other recent reports such as employment and manufacturing data, they all show that American recovery efforts are slowing. As it slows, the talk of more monetary easing picks up. “We still believe the Fed would prefer to wait a bit longer on QE3 to see how the domestic and global situations play out, but the weak data certainly strengthen the argument for action,” said Michelle Girard, senior economist at RBS in Stamford, Conn.

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

  • Gold, $1,616.40, Up $2.60.
  • Silver, $28.99, Down $0.06.
  • Platinum, $1,468.10, Up $11.70.
  • Palladium, $623.50, Down $0.80.
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Gold gains momentum & Spanish Yields

Gold continues to march in positive territory during today’s mid-day trading and appears to be gathering momentum. The euro gained ground relative to the dollar and other commodities (copper) are seeing their prices moving up as well. “(We had) a small pop higher in the euro and that was it,” Saxo Bank vice president Ole Hansen said. “The market wants to go higher now and it has taken comfort from the fact that buyers returned fairly quickly after the sell-off last week.”

The U.S.A. stock market is holding on to some gains today while absorbing the impact of Spanish bond yields hitting historic highs. There is still concern over Spanish debt levels and questions about the bank rescue deal. “Into their close, both Spanish and Italian bonds are bouncing off their (price) lows. The daily egg shells we walk on this week over Spain will of course be followed by Sunday’s election in Greece and what, if anything, the FOMC (Federal Open Market Committee) will announce next week,” said Peter Boockvar, at Miller Tabak & Co. The coming election in Greece is being viewed as a major factor in its status in the Eurozone.

At 1:00 p.m. (EDT) – the APMEX precious metals spot prices were:

  • Gold – $1,612.90 – Up $16.10.
  • Silver – $28.96 – Up $0.26.
  • Platinum – $1,454.50 – Up $3.20.
  • Palladium – $623.20 –Down $2.00.
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The reactions to the Spain bailout are pessimistic

Goldman Sachs Group Inc. is forecasting a 23 percent return in a year for industrial metals with gold as one of their top picks. Jeffrey Currie, head of commodities research said, “Although the macroeconomic backdrop still remains uncertain, particularly in Europe, we believe that the selloff in commodity prices is likely overdone and the price risks are shifting more to the upside.”

Spain is now the fourth eurozone member to receive a bailout in the past three years when the debt crisis began in Europe. There is fear in the air that this bailout will put the nation in a deeper hole causing them to need assistance as well. Christian Reicherter at DZ Bank AG said, “This bailout doesn’t solve the euro-region debt crisis. There is skepticism about whether the money is enough for the banks and whether the nation might also need help, and this will keep Spanish bonds under pressure.”

The market is reacting to the Greek elections that are approaching with the U.S.A. stock market falling today. Investors are remaining cautious with the possibility of the Federal Reserve announcing another round of quantitative easing. Andrew Fitzpatrick at Hinsdale Associates said, “It’s a market that is looking to the next thing. It’s a market that is looking to the next thing. It could be Greece, and it could be further economic data. It’s a market waiting for possible Fed or European bank easing.”

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,597.60, Up $6.20.
  • Silver, $28.61, Up $0.05.
  • Platinum, $1,445.70, Up $18.60.
  • Palladium, $622.00, Up $10.00.
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Gold price holding stady; China looks to increase holdings

The Gold price has been steady today after last week’s drop in price. The well documented economic crisis in Europe has the market in a holding pattern until further news warrants movement. There has been much talk of how the yellow metal is being affected by global issues, however those issues may not be the strongest influence of late. “While commentators spend much time talking about how Gold is being influenced by the risk to the global financial/banking system from euro troubles, Gold seems to be primarily tracking one trend, namely the trend in the U.S. dollar,” Citi said in a note.

The focus of European economic trouble seems to be on Spain. While the issues with Greece and Italy have been well documented, the issues with Spain are maybe even more complex. Spain has historically been a strong economic force in Europe. Spain’s banking system has been seen as well managed, unlike those in Greece and Italy. Dr. Peter Morici of the Robert H. Smith School of Business said, “Simply, Spain’s resort industry, home values and banks are collateral damage of the wider global crisis and European recession. Indeed, the IMF, in a detailed report published on May 30, found the core of Spanish banking sound, regulation generally effective, and needed restructuring well under way.”

China has taken notice of the financial issues in Europe and is looking to Gold for diversity. “Investors here want to hold part of their assets in Gold to hedge for the risks, especially now that the financial crisis has evolved into a sovereign crisis,” Zheng Zhiguang, general manager of the Precious Metals department at Industrial and Commercial Bank of China Ltd., said in an interview in Shanghai. Gold demand was 13 percent higher in the first quarter of this year compared to 2011.

At 1:02 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,593.00, Up $1.60.
  • Silver, $28.56, Unchanged.
  • Platinum, $1,450.90, Up $23.80.
  • Palladium, $625.60, Up $13.60.
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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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