Congress to hear Fed Chairman; Gold Price moving

Official portrait of Federal Reserve Chairman ...

Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)

Precious Metals prices were fluctuating this morning ahead of Federal Reserve Chairman Ben Bernanke’s scheduled testimony before Congress this afternoon. Any further monetary easing would be a boon to Gold prices. Analyst Daniel Brebner said, “As it seems the U.S. data continue to deteriorate, the market is starting to anticipate some kind of action, or at least rhetoric, from the Fed to support growth. … Will Bernanke come out dovish as usual? I think so. Will he explicitly discuss his options? I’m not convinced he will. So I’m not sure he’s going to give the market what it wants.” Meanwhile, Germany and Great Britain’s automobile sales have helped boost other Precious Metals including Platinum, thanks in large part to greater diesel usage, which affects demand for catalytic converters.

The focus of the Fed seems to be switching to unemployment numbers, as American unemployment has hovered above 8 percent for almost four years. The Fed’s original projections have been adjusted to reflect the higher levels. Chief Economist John Silvia said, “The employment number just isn’t improving; it’s the thing that’s out of whack. … Yes, you’ve got a dual mandate. But like everything else in life, sometimes you’ve got to focus on one more than the other.” Meanwhile, other economists have a more optimistic outlook for Bernanke. Economist Dean Maki said, “When people look back at the Bernanke years, I doubt they’ll be critical of him if the unemployment rate is falling, but just not as fast as people would like, because there’s a recognition that this was a deep recession.”

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

  • Gold, $1,587.40, Down $5.90.
  • Silver, $27.27, Down $0.13.
  • Platinum, $1,420.70, Up $3.40.
  • Palladium, $583.70, Up $4.90.
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Analyst predicts the price will reach $2,300 per ounce

Market analyst Ronald Stoeferle at Erste Group recently released a comprehensive report on Gold’s value and a forecast. Stoeferle suggests that the fourth quarter of 2012 could be extremely positive for the yellow metal; he predicts the price will reach $2,300 per ounce. Stoeferle said, “Due to its high liquidity and unique characteristics, Gold is becoming ever more prominent as collateral. Therefore, we are currently seeing the renaissance of Gold in international finance. The foundation for a return to ‘sound money’ has been laid.” He added, “Gold is now officially again ‘as good as Gold’ and ranks on the same level as cash. We expect this decision to have a wide range of implications. For example, the opportunity cost of holding Gold will be reduced massively.”

One American consumer sentiment index fell to its lowest point this year with an unexpected decline to 72 in July, compared with June’s reading of 73.2. Reasons include one of the weakest quarters in corporate hiring in two years and an unbalanced stock market that is attached to the ongoing European debt crisis. Sean Incremona at 4Cast Inc. said, “We could continue to see a fairly mild trend in consumer spending. Employment is the main factor that’s really keeping the consumer underweight at this point.”

At 1:01 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,592.70, Up $25.80.
  • Silver, $27.44, Up $0.20.
  • Platinum, $1,431.70, Up $19.20.
  • Palladium, $587.00, Up $11.20.
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Metals react to jobs report; What is the Fed’s next move?

Precious metals prices are positive, after the jobs report showed only 69,000 new jobs were added for the month of May pushing the unemployment rate to 8.2 percent. “For those lucky enough to have a job, their spending power is sliding when accounting for inflation. The markets will respond negatively to this report,” Todd Schoenberger, at The BlackBay Group in New York, said. The market so far has reacted negative to this data, while it has given precious metals the encouragement it has needed to get back on its feet. The housing market will be affected by the weaker-than expected jobs report according to Doug Duncan chief economist at Fannie Mae. Duncan stated, “The recent trend is reminiscent of the monthly patterns of the spring slowdown witnessed over the last two years that continued through the summer months. If this pattern recurs, we expect that hopes for a meaningful housing recovery will be delayed once again.”

Gold rose above $1600 this morning responding to pessimistic U.S. data that was released. Richard Hastings at Global Hunter Securities said, “Gold reacts beautifully, and with the best price action, on U.S. troubles, and this morning’s wonderfully wobbly jobs data did the trick. Not only would there be more speculation about [a third round of quantitative easing] … but all of the data speak to tax revenue dilemmas due to growth limitations, and this means the U.S. budget comes back into focus. If this occurs, then gold could rally this summer. If neither occurs, then gold would remain under pressure due to the return of deflation.”

At 1:14 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,619.40, Up $55.70.
  • Silver, $28.66, Up $0.81.
  • Platinum, $1,436.10, Up $16.50.
  • Palladium, $613.00, Down $0.90.
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Metals Retreat as Dollar Continues to Climb

Currency markets pushed the American dollar higher amid dim hopes for a European solution. Kevin Hebner, a foreign-exchange strategist for JPMorgan in London, wrote to clients today, “For the second time in six months, Greece’s Economic and Monetary Union exit seems imminent.”  Fears of a breakup of the eurozone have been driving down the value of the European currency for the last few weeks.  A weak euro bolsters the American dollar, and as a consequence, typically pushes down the price of precious metals and other commodities.

A bit of positive news surrounding the American housing market was released today, indicating an increase in sales of existing homes.  “We’re still a ways from looking at an encouraging picture of the U.S. economy, though when it comes to housing, every little bit helps,” said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.  Overall home values have increased 10.1% from April 2011, but are still about 30% lower than the high-water mark set in 2006.  Diana Olick, a real estate reporter for CNBC cites a reduction in bank foreclosures and distressed sales as the primary driver for the higher prices.

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

  • Gold, $1,569.10, Down $21.10.
  • Silver, $28.25, Up $0.17.
  • Platinum, $1,448.80, Down $14.70.
  • Palladium, $613.00, Up $0.30.
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