Central Bank Considers Reclassification of Gold Bullion

The Central Bank of the US Federal Reserve released a memo on June 18, which calls for the reclassification of gold from a 50% weighting to a 100% weighting. Currently, for every $1.00 held by the banks or central bank only 50 cents can be claimed as book value. By changing gold to a 100% weighting, it would retain full value just like other financial instruments. This would enhance gold’s appeal to the banking community and possibly drive up demand.

Friday’s big jump in the stock market was a reaction to news that European leaders are going to come up with a viable bailout plan. Although this was welcome, it is still a bailout and the European economies are still desperately struggling. U.S. companies are affected as well, and this is expected to show in the upcoming earning reports. Many U.S. companies are issuing warnings and they site Europe as a key factor for their disappointing numbers. Second quarter reports will show the euro debt crisis, weak European and Chinese demand, decline of the euro and the overall global economy will affect the earnings of many U.S. firms.

At 9AM EST the APMEX precious metals prices were:

  • Gold price – $1,594.50 – down $11.20
  • Silver price – $27.53 – down 15 cents
  • Platinum price – $1,439.50 – down $11.40
  • Palladium price – $580.90 – down $4.70
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EU shocker sends precious metals higher

Precious Metals prices moved noticeably higher in early morning trading as the dollar weakened against the euro on news of a European plan to lower eurozone member nations’ borrowing costs. Economist Vishnu Varathan said, “It still falls short of a concrete solution, but the removal of severe pessimism over what’s going to come out of the EU summit is driving markets higher.” Meanwhile, the news has led analyst Lynette Tan to offer a positive year end outlook for Gold. She said, “In the long run, we’re still bullish on Gold. It’s still likely to hit last year’s high of $1,920. The global economy is not doing well, and we expect safe haven demand to be back for Gold.”

Eurozone leaders came together and hammered out a surprising compromise plan to help member nations. There are still issues to be worked out, but going from “no hope” to at least a road map of a plan on which everyone agrees has been a boost to global markets. The biggest shock of all was Germany’s agreement to a majority of the provisions. Banker Holger Schmieding said, “The summit result offers no ‘silver bullet’ to solve the euro crisis once and for all. … It is another attempt to buy some extra time for the underlying fiscal repair and structural reforms to show results. All in all, there is some progress.” However, strategist Charles Diebel stated what many investors are probably thinking: “It is one step on a very long road. But we don’t have any details, and arguably the detail is where the risk lies, because the market will start to pick holes in it, as we’ve seen previously.”

At 9:03 a.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,598.50, Up $46.60.
  • Silver, $27.73, Up $1.38.
  • Platinum, $1,428.00, Up $40.20.
  • Palladium, $580.00, Up $15.10.
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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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Gold Climbs over $75 from Morning Lows

Gold prices slipped below $1550 in early morning trading before closing today over $1625. The U.S. jobs report sank stocks across the globe, while gold once again became a safe haven for nervous investors. Gold was up 4% on the day, but up over $75 from morning lows. It had actually begun the day in negative territory.

Is it possible that the weak job growth in the USA will threaten the world economy? When you add this to what is going on in Europe and the Chinese factory production going into neutral, there is cause for concern. “It certainly suggests that perhaps the softness in Europe is either influencing the U.S. or that the U.S. recovery may not be strong enough to overcome the softness in Europe,” said Jack Ablin, Chief Investment Officers at Harris Private Bank in Chicago.

Gold and silver prices and been sinking in the past month because the U.S. Dollar has risen in relation to the European euro. Today’s jobs report could verify what many analysts have already indicated. The U.S. dollar is simply the least wilted rose in the vase. The US Treasuries are paying all time lows and the spread between 5 and 10 year notes is at all-time highs. There are many who feel that gold will become the safe haven status, and today’s rise is just a beginning.

Have a great weekend!

At 5PM EST the APMEX precious metal prices were:

  • Gold price – $1,627.10 up $63.40
  • Silver price – $28.75 up 91 cents
  • Platinum price – $1,447.60 up $28.00
  • Palladium price – $613.00 down 90 cents
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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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Bullish investors waiting for Gold trigger

Gold has moved off its morning gains today, as another sharp drop in the euro’s value has investors looking to the United States dollar.  Issues with the Spanish banking system, a spike in Italian borrowing expense, and the upcoming Greek elections have fanned the flight to the safety of the dollar. But American economic data is starting to disappoint, with increases in new jobless claims and a sharp drop in the Midwest business activity index, which could open the door to a new round of easing. “If we had momentum upwards, there are still plenty of people who are bullish and who would buy into that. But at the moment, you have pressure from a strong dollar, or perhaps more accurately a weak euro, and people are just a little bit wary. That doesn’t alter the fact that there are plenty of bulls out there. They are waiting for a trigger to send the price higher. And the question is, what’s that trigger?” said David Jollie at Mitsui Precious Metals.

Today’s drop in U.S.A. stocks has the Dow Jones industrial average on pace to finish May with a loss, which would be its first loss in the past eight months. Worries over the European Union and its economies added to troubling employment numbers. “It’s the summer months, unfortunately, so that’s one strike. And everyone is out hunting for black swans and finding them. It’s a strange environment where investors just don’t trust the market at all, so the question is how cheap do stocks have to get before they can entice investors again,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

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

  • Gold, $1,569.10, Up $3.90.
  • Silver, $28.10, Up $0.03.
  • Platinum, $1,420.80, Up $17.60.
  • Palladium, $613.00, Up $7.30.
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Expectations of Euro stimulus holds markets

Precious metals, stocks, and currencies all seem to be trading quietly this morning.  Many investors are expecting the European Central Bank (ECB) to announce some sort of stimulus or support the markets some other way soon.  However, strategists at Barclays said, “The bottom line is that in the near term, the policy response (by the ECB) is likely to be fairly limited, except if there is a serious further deterioration in sentiment or economic conditions.”

The gold price is slightly positive, staying over the $1,560 mark for the time being.  Lynette Tan of Phillip Futures said, “(Gold) is also weighed down by dollar strength and we see any positive economic or employment data from the U.S.A. as pressuring gold.”

Economists have estimated that Greece leaving the eurozone could impact the U.S.A. to the tune of one-tenth to one-half of a percentage point in gross domestic product growth.  Reuters recently lined out three possibilities, and the ramifications of each: The eurozone stumbles along, Greece leaves, or a messy situation where Greek leaves and damage spreads.

At 9 a.m. (EDT), the APMEX precious metals spot prices were:

  • Gold – $1,565.10 – Up $6.10.
  • Silver – $28.22 – Down $0.03.
  • Platinum – $1,428.00 – Up $3.60.
  • Palladium – $591.40 – Down $1.90.
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