Gold Ends Higher for the First Day in Five

After closing lower for four consecutive trading days, gold prices rebounded today after hitting a 10-month low.

Oil prices continued to decline today, providing some welcome relief to American consumers. “We had soft economic data and European concerns weighing on equities and oil is being pulled along lower,” said Jason Schenker, president of Prestige Economics LLC. “Elevated concerns about the European story and disappointing U.S. economic data have been the story for two weeks now.”

Moody’s is set to announce downgrades of several Spanish banks this evening. According to a source with knowledge of the issue, the key reasons for the downgrades are rising loan defaults, a renewed recession, restricted funding access and the reduced ability of the government to support lenders. The Spanish newspaper El Mundo reported yesterday that customers of the Spanish bank Bankia SA had withdrawn more than 1 billion euros from the bank since the government announced it was taking over the bank on May 9. Bankia SA and the Spanish government denied that a bank run was underway, but markets hammered Bankia’s share price nonetheless.

Ahead of tomorrow’s G8 summit at Camp David, Barack Obama is urging European powers to ease austerity policies and adopt a growth strategy. The newly elected president of France, François Hollande, is expected to support Obama’s argument. Hollande defeated incumbent Nicolas Sarkozy by campaigning against austerity measures, which are deeply unpopular in some European countries.

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

  • Gold – $1,575.20 – Up $37.10.
  • Silver – $28.08 – Up $0.80.
  • Platinum – $1,454.00 – Up $19.80.
  • Palladium – $604.00 – $7.90.
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Eurozone fears permeate the precious metals market

Precious metals have remained relatively steady in overnight trading. Physical demand and better than expected German data helped maintain prices during overnight trading, but there continues to be concern over Greece’s role and whether or not it will stay in the euro that adds to the volatile currency market. Marex Spectron said, “When German GDP came in at 0.5 percent, a lot higher than expected, the subsequent rally in the euro gave rise to a quick 10-dollar short covering rally in gold.” However Gold’s rebound is viewed as a likely scenario as Pradeep Unni said, “(Gold’s) safe haven status has been tarnished… It will wobble on the euro’s weakness, but in a very short term, bargain hunting and pent-up demand will emerge taking it higher.”

The push for austerity in Greece remains in place regardless of the pleas from Alexis Tsipras, who boycotted a bargaining meeting yesterday in support of his views. The talk of Greece leaving the euro is not viewed as a realistic option. However, the failure of the Greek government to form a unity government after its most recent elections continues to adversely affect European markets. Marchel Alexandrovich said, “The euro breakup story is gathering steam again… If Greece were to ever exit the euro, no amount of reassuring comments will convince investors that other countries won’t soon follow.”

Francois Hollande is to be sworn in as French President later today. Once sworn in, he is expected to fly to Germany to meet with Chancellor Merkel for the first time. The meeting will be closely monitored due to their disparate views and Merkel’s very public support of Hollande’s challenger Nicolas Sarkozy. Carsten Brzeski said, “In our view, what currently looks like a clash between growth-fanatics and austerity-fetishists will eventually end in a good European compromise with something for everyone: The fiscal compact and the medium-term goal of balanced budgets should remain intact, but complemented by a new growth compact with European funds and initiatives.” Erwin Grandinger said, “I think it’s the first kick-off meeting to repair personal relations between Hollande and Merkel. Merkel had done something extremely unusual. She took sides in the presidential elections.” Hollande has supported pro-growth sentiments, while Merkel has had a pro-austerity position.

At 9:00 a.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,559.90 – Down $2.50.
  • Silver – $28.28 – Down $0.14.
  • Platinum – $1,450.40 – Up $6.80.
  • Palladium – $603.50 – Up $7.60.
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Weekly Gold & Silver Market Recap for April 13, 2012

by John Foster. Email John.

Golden Roller coaster:

US economic news this week was good, but not as good as hoped, adding to concerns there might be more quantitative easing.  Atlanta Federal Reserve President Dennis Lockhart said he feels differently. “The U.S. economy remains fragile, but things would have to get a lot worse for the Federal Reserve to launch another round of monetary stimulus.”  The Federal Reserve released its “Beige Book” summary with positive news about the U.S. economy. The auto industry sales and growing manufacturing of tech goods are the main reasons for the upswing. The news was not all positive, however. A large portion of the report focused on high gasoline prices and effects on industry. “This confirms that it’s a strengthening economy, and that takes pressure off the Fed,” economist Eduardo Martinez said. This is the first positive Beige Book seen in a year’s time.

Worries about Spain:

The economic issues in Spain continue to worry experts. With a growing budget deficit and a 23 percent unemployment rate, the outlook is grim. But there are hopes for recovery. Spain’s prime minister has a plan to reduce debt and shore up the banks. There have been positive signals. Deutsche Bank economist Gilles Moec said, “We’ve seen more progress in a few days than in four months.”  The Spanish troubles are even making waves in French politics.  The This image shows Nicolas Sarkozy who is presid...ongoing debt crises in the eurozone are seen as a boost for French President Nicolas Sarkozy. Although he trailing in most polls, the growing uncertainty within the region is boosting his appeal after his work with German Chancellor Angela Merkel in handling the Greek debt issues. However, Sarkozy does trail challenger Francois Hollande in most polls. Sarkozy said, “If we return to spending without control, we will find ourselves in the same situation as Spain.” The main worry is that if Spain were to default, which other nations are starting to fear, then the $1 trillion already in the coffers will not be enough to protect the eurozone. Spain’s problems are viewed by some analysts as far worse than those of Greece. Continue reading