Bailout accepted by Spain

Gold and Silver prices both opened higher Sunday on the announcement this past weekend that Spain agreed to a $125 billion (American dollars) bailout. The devil is always in the details, and although the details of this agreement are still unknown, both equity and Precious Metals markets have reacted favorably. The money will go to struggling Spanish banks. It is hoped that this infusion of capital will revive Spain’s financial system.

Now that a bailout has been accepted by Spain, the focus will shift to the approaching Greek election. The Greeks will decide Sunday whether they will remain in the European Union, thereby holding together the eurozone. On May 6, elections were held with neither party being able to form a government, so a new election was scheduled for June 17. The pro-bailout New Democracy party is slightly in the lead, but it is still unknown whether that party will be able to form a coalition if it wins the election.

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

  • Gold, $1,595.80, up $4.40.
  • Silver, $28.74, up $0.18.
  • Platinum, $1,454.30, up $27.20.
  • Palladium, $623.00, up $11.00.

Precious metals are down 1%-2% this morning

Precious metals are down 1%-2% this morning as investors await news from an informal summit meeting in the eurozone.  David Morrison of GFT Markets said, “Although this is litle more than a taxpayer-funded dinner for Eurocrats ahead of the main summit in June, any further signs of a rift between Germany and France will see the euro and equities fall further.”  Lately, as the euro has moved, so have precious metals.

Germany and France are far from the only topic of note in the eurozone.  The main focus at the moment seems to be the potential exit of Greece from the group.  Jim O’Neill, chairman at Goldman Sachs Asset Management said, “The markets are putting together a higher probability for the end-game in the eurozone…” in reaction to high demand for Germany’s two-year, no-interest bonds being sold at the lowest yield ever.  Speaking on the ramifications of Greece leaving the bloc, he said, “Once one exits, it breaks the notion that it’s a true currency union and that is a big moment.”

Oil markets, which have historically held a positive correlation to gold, have been uneasy in the midst of sanctions placed on Iran and other happenings in the Middle East.  A meeting between Iran and six world powers, including the U.S.A., is taking place to continue to attempt to convince Iran to scale back its nuclear program.  Iran has made it clear that it will not be intimidated, however, Russia’s foreign minister believes that the impression is that Iran is “ready to seek agreement on concrete actions.”

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

  • Gold – $1,563.10 – Down $15.10.
  • Silver – $27.87 – Down $0.40.
  • Platinum – $1,433.00 – Down $27.40.
  • Palladium – $609.50 – Down $8.00.

Precious metals continue to ride eurozone train

The concerns out of the eurozone continue to pull down the euro and strengthen the U.S. dollar, thus pulling down prices. Gold in particular has remained relatively fluid within a certain price range of $1,530 to $1,590. However a key price indicator in the short term continues to be $1,600 an ounce. However, euro pressure continues to be in the driver’s seat for prices. An unidentified international dealer said, “If we break above $1,600 and even go higher to confirm the bull trend, we will see more buying.”

Greek citizens continue to hold out for hope that money will be found to help bail the country and its citizens. The prevailing feeling is that Europe will not just cut their losses and kick Greece out of the eurozone. An alarming, almost de ja vu-ish feeling permeates through the country as some citizens say, “There’s a lot of money in this country, they just need to tax the rich and it would solve so many problems.” Does that sound familiar? The Greek citizens voice their displeasure through their voting results, with another election coming next month and fears that the drachma will come back.

The issues surrounding Greece do have some impact on the U.S. and should not be taken lightly. There are a few issues in particular including the U.S. banks’ susceptibility to eurozone debt. The weakening power of the euro as a currency could mean that U.S. goods would also become more expensive, diminishing the value of those goods. As well as the global impact that could be felt by other global powers like China.

At 8:01 a.m. (EDT) – the APMEX Precious Metals spot prices were:

  • Gold – $1,579.50 – Down $10.70.
  • Silver – $28.29 – Down $0.12.
  • Platinum – $1,460.90 – Down $2.60.
  • Palladium – $613.70 – Up $0.90.
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