Gold and equities markets down again on world growth outlook


Trepidation continues to weigh on investors as the U.S. stock market opened to early losses this morning. A meager outlook for global growth and reduced earnings are the catalysts for market dips in recent days. “We have had a number of large companies reporting poor visibilities and that is going to continue,” said Michael O’Sullivan, head of portfolio strategy at Credit Suisse Private Banking in London. “Revenue growth is simply weak because the U.S. economy has slowed, the Asian economy has slowed and Europe is in recession.”

Gold is down this morning as negative forecasts for global economic expansion weigh on Precious Metals markets as well. Though Gold has realized three straight sessions of losses, the metal rallied to 11 month highs in the third quarter peaking at $1,795 an ounce. Long term investors are still seeking the security presented by the yellow metal as uncertainty remains pervasive in equities markets. “The long-running rally is intact, however, and we expect that Gold prices will revive after a period of consolidation,” said analysts at HSBC bank.

At 9 am (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1760.00, Down $2.50.
  • Silver, $33.92, Down $0.08.
  • Platinum, $1670.40, Down $21.90.
  • Palladium, $651.50, Up $7.70.

APMEX’s Account Managers now have extended hours and are here to serve you until 8 p.m. (EDT) Mondays through Thursdays! Or call us Fridays until 6 p.m. (EDT)! If you have any questions about investing in Precious Metals or simply would prefer to place your order by telephone, we are here to help.


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Overnight profit taking for the euro


International Monetary Fund's Managing Directo...

International Monetary Fund’s Managing Director Dominique Strauss-Kahn (L) talks with , European Central Bank President Jean-Claude Trichet (C) and Italy’s Governor Mario Draghi (R) prior to the start of their G-7 meeting at the Istanbul Congress Center (Photo credit: Wikipedia)


After a four month euro rally, Tuesday saw some profit-taking and the euro fell against the dollar. Spain’s seeming reluctance to seek a bailout isn’t sitting well with investors either. Derek Halpenny, head of FX research in London, said “If Spain steps forward (to ask for a bailout) and all of us get some clarity it would remove an element of uncertainty.” While in a television interview, Spain’s Deputy Prime Minister admitted they were still considering the conditions of a possible bailout.


The other side of the euro coin is that German investor confidence rose for the first time in five months. The rise is in response to the European Central Bank’s plan to buy government bonds. Holger Schmieding, chief economist at Berenberg Bank in London, said of ECB President Mario Draghi, “Draghi may have saved Germany.


Gold, which tracks closely to the euro, came off a recent six month high. Similar to the euro, it succumbed to overnight profit-taking. Without any new news today, it wouldn’t be surprising to see investors jump back in.


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


  • Gold, $1,764.60, Down $5.00.
  • Silver, $34.44, Up $0.06.
  • Platinum, $1,670.10, Down $3.50.
  • Palladium, $682.40, Down $6.70.


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Is the euro currency already dead?


Precious metals recovered from early losses this morning after the release of the Consumer Price Index showed the smallest year-over-year increase in nearly two years.  The better-than-expected report could support the Federal Reserve’s looming decision on another round of monetary stimulus.  Also, a key business gauge contracted unexpectedly for the first time in nearly a year.  The “Empire State” index showed a drop to minus 5.85 from 7.39 last month.

Quantitative easing (QE) from either the European Central Bank (ECB) or the Fed seems to be the key factor in a rally for the price of Gold.  Should either central bank announce a round of QE, prices are likely to increase due to the results of such action all being supportive of the Gold price.  Investors shouldn’t be surprised to see action from Europe before the U.S., however.  London’s Marex Spectron said in a note, “The eurozone appears to continue to struggle, while the U.S. keeps surprising the market with positive figures.  This only enhances the chance the the ECB is more likely to act before the Fed.”

Matthew Lynn of Marketwatch writes that the euro as a currency is much like a zombie.  He writes, “Some countries can’t use the euro for imports because of fears that drachmas or lire may suddenly replace euros.”  Lynn explains that oil traders, for instance, may be wary of selling oil to a country like Greece, because when payment is due six months down the the road, they may not be paying in euros, but in something worth far less.  “When a currency stops working the damage done to the economy is immediate.  Trade stops flowing.  Investment gets postponed.  Capital flees.  Very quickly, unemployment starts to rise, and output declines.  That is exactly what is happening in the eurozone right now,” he writes.

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

  • Gold, $1,601.10, Up $0.20.
  • Silver, $27.92, Up $0.05.
  • Platinum, $1,398.70, Down $1.50.
  • Palladium, $577.90, Down $2.00.


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Weekly Gold and Silver Market Recap for Aug 10, 2012


Gold markets pulled in two directions during the week:

As the week comes to a close, there is much uncertainty in the gold market. On Monday there was a rise in price based on higher unemployment rates in the U.S.A. and more talk about the possibility of another round of monetary easing by the Federal Reserve. “There is still room for easing if it is required, and there is still a perception that it may be required,” said David Jollie, an analyst with Mitsui Precious Metals. Then on the very next day reports of better than estimated corporate earnings sent the U.S. dollar up and gold prices down. “The fear of things collapsing is going away,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, N.Y. “The recession, which everyone was concerned about a month ago, is not going to happen.” As of Friday there was another report that raised the gold prices back from the mid-week dip, from an unlikely source, the United States Agriculture Department. “We have seen Gold running higher this afternoon. I think this is a spillover effect from the USDA crop report out today, which is confirming fears of a reduction in production,” said Ole Hansen, a senior commodity strategist at Saxo Bank. “This is indicating that we could see continued high prices for some of these key crops in the months ahead. And especially in some emerging economies, this could lead to higher inflation towards the end of the year.

Europe’s financial issues keep piling up:

The financial crisis in Europe has been well documented for many months now. With every passing week there are many questioning if there is any chance of recovery or if the Euro is on its last leg. This week did nothing to quell that negative outlook. One of the major banks in the U.K. was linked to illegal transactions with Iran, which is under major U.N. sanctions. If this is found true, the bank could lose its New York banking market license. Analyst Gareth Hunt said,Some people were walking around under the illusion that Standard Chartered was the world’s first riskless bank, and it’s not. We’ve discovered that Standard Chartered is a mortal bank, as they all are.” Standard Chartered was one of the least affected global banks during the global financial crisis. This credibility hit, coming when banks need to step up and lend during globally uncertain times, is alarming. Another issue in England is the rocky relationship with the Eurozone. While they do not use the official currency of the Euro, they are a member of the European Union. Britain is officially thinking about exiting from the European Union.  There are concerns on how the financial markets would be affected if the U.K. leaves the EU. Financial services group Nomura issued a report stating, “We believe, increasing possibility of either a looser U.K. relationship with the EU or a U.K. exit is bound, in our view, to raise both economic and political concerns, including in financial markets.” One constant positive in Europe has been Germany. The country has been able to avoid the financial shortcoming of the other nations in the area. As it has been said before, “nothing last forever,” and Germany’s solid economy is not an exception.  Joerg Kraemer, chief economist at Commerzbank, said, “The German economy is losing momentum — there’s no doubt about that — and in the third quarter the economy will shrink compared to the second quarter. Things will go downhill from here. The German economy is not faring as badly as the rest of the eurozone, but it can’t disconnect itself, especially as growth in China has slowed and continues to do so.”

The United States gives mixed signals:

Reports in the United States are showing that productivity in the workforce is down. One expert said he believes that is the best case scenario at this time. “The only reason 1.7 percent GDP growth can go with 1 percent jobs growth is because productivity growth is less than 1 percent,” said Robert Gordon, a Northwestern University economics professor. These numbers, while not ideal, have created a drop in unemployment benefits claims over the last year. The trade deficit narrowed to the smallest gap in nearly two years, and weekly jobless claims fell after economists expected an increase. The four week moving average of the jobless claims, however, increased slightly. Recently, good news for the American economy has worked the opposite way with Precious Metals, as good news makes the Federal Reserve less likely to institute another round of quantitative easing. Import prices in the United States fell unexpectedly in July, extending the streak to four months of declines. The decline in import prices could be one more reason for the Federal Reserve to ease monetary policy further. Historically, tools such as quantitative easing have been very supportive of Precious Metals prices. These reports are a good indication of why the gold market has stayed relatively flat this week. It’s better, then it’s worse, and then back to better. As for this week gold did exactly what the market dictated, it held steady.


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Strong euro continue to boost Gold


Gold is holding on to morning gains following comments by the president of the European Central Bank, which have buoyed the euro for a second day. “You’ve got a rise in the euro, which means a weaker dollar, and a ‘risk on’ environment, so everything that looks like a risky asset goes up. Gold has been trading just like a commodity (lately) and is behaving like one today,” Natixis analyst Nic Brown said.

European Central Bank President Mario Draghi has stated that as part of the ECB’s effort to protect the survival of the euro, it will be buying Spanish and Italian government bonds. This move also is believed to help lower borrowing costs. “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi said at an investor conference in London. “And believe me, it will be enough.”

Business investment is looking to be cooler in the second half of the year, as orders for business equipment dropped in June. Lower American consumer spending and overseas demand have many companies delaying replacing equipment. “Business investment has definitely shifted lower,” said Tom Porcelli, chief United States economist at RBC Capital Markets LLC in New York. The European debt crisis and the looming “fiscal cliff” will “put downward pressure on orders, which will translate into weaker growth in the U.S.,” Porcelli said.

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

  • Gold, $1,615.90, Up $5.80.
  • Silver, $27.58, Up $0.02.
  • Platinum, $1,404.60, Up $5.20.
  • Palladium, $570.90, Up $4.60.

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