Japan joins the “Disappointing reports” club


U.S. stocks dropped today following a five-week rally in the Dow Jones Industrial Average. The dip comes following news of disappointing economic data from Japan. Economists projecting 2.7% GDP growth for the country in the second quarter received figures that expansion fell short by reporting only 1.4% growth. Fred Dickson, chief market strategist at D.A. Davidson & Co. stated, “Japan was a little weaker than expected. It might raise hopes that there might be some central bank coordination, but I’m not seeing that in any of the markets today.”

The Gold price continues to trade flat at the halfway point today, even as the dollar is down against the euro for the first time in four sessions. Though the euro is up slightly, there are still expectations that the European Central Bank will soon step in with measures to stimulate a lagging European economy. Global head of currency strategy at Brown Brother Harriman, Marc Chandler said today, “The euro is well below the highs of last week and today we are seeing some short-covering, but the move today is generally uninspired in a lackluster session.” Economic analysts predict the euro to remain fairly steady until September 12 when the German constitutional court declares its decision regarding fiscal discipline and a proposed “rescue fund” for the eurozone. U.S. investors are also anxious at the prospect of more government stimulus as the much anticipated news of a third round of quantitative easing is expected to drive Precious Metals prices up dramatically.

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

  • Gold, $1,619.40, Down $1.90.
  • Silver, $28.00, Down $0.17.
  • Platinum, $1,394.60, Down $6.30.
  • Palladium, $576.50, Down $7.30.


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Roubini on 2012’s “Global Perfect Storm”

Precious Metals are trading mostly flat this morning, taking a cue from the euro.  The common currency has rebounded slightly since hitting a two-year low on Friday.  Adam Myers of Credit Agricole wrote, “The currency market mood is likely to turn more pessimistic this week as investors return their focus to fiscal-policy challenges.  In the wake of [Federal Reserve, Bank of England, and European Central Bank] announcements, there now appears little on the monetary-policy front to lift investor sentiments.”  Lately, Gold and Silver have largely followed the currency markets, moving inversely to the American dollar.

Two months ago, economist Nouriel Roubini said that four key items, if happening simultaneously, could create a “perfect storm” for the economy.  The four items – a slowdown in emerging markets, military conflict in Iran, the European debt crisis, and growth slowing in the U.S.A. – seem to be coming together now.  Roubini said, “Levitational force of policy easing can only temporarily lift asset prices as gravitational forces of weaker fundamentals dominate over time.”  Historically, Gold has reacted positively in times of economic uncertainty.

American stock futures are falling this morning due to news out of Japan and China.  In Japan, machinery orders experienced their largest fall in over ten years.  Mike Lenhoff of Brewin Dolphin Securities Ltd. said, “We’ve had a bit of a shocker out of Japan.  [The three-day losing streak for stocks] indicates a loss of momentum in the underlying global economy.”  Chinese Premier Wen Jiabao said that downward pressure on the economy in the country is still “relatively large.”  As mentioned by Roubini, China is a key factor in the global economic recovery.

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

  • Gold – $1,586.90 – Up $6.50.
  • Silver – $27.31 – Up $0.32.
  • Platinum – $1,443.00 – Down $6.50.
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