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Closing Gold & Silver Market Report – 2/29/2012

SHARP SELL-OFF FOR GOLD, SILVER; FANNIE MAE TO SEEK $4.6 BILLION  

Gold and Silver experienced drastic sell-offs today after testimony by Federal Reserve Chairman Ben Bernanke before the House Financial Services Committee. Bernanke indicated that the Fed is not likely to consider a third round of quantitative easing. Prices for Gold and Silver ended at their lowest points since December. With the view of the market being that a QE3 might not happen or even be needed, the dollar has surged at the same time that the outlook for commodities such as precious metals has turned bearish. Jim Steel, chief commodities analyst for HSBC, said, “In recent trading, Gold neared but was unable to get over the most recent high of $1,803 per ounce set in November 2011.” Steel said the factors were right for a Gold sell-off due to sell-stops that were triggered today, a decrease from emerging markets for physical demand, and continued declines in oil prices. However, Steel said he anticipates continued volatility in precious metals markets and suggested that today’s activity might be the result of a pullback. “Accommodative monetary policy is still there, and so are the underlying factors for higher Gold prices.” Meanwhile, his firm’s expectation is that the Gold price will climb again and average $1,850 per ounce this year.

Another piece of news that came out of Bernanke’s testimony Wednesday was the revelation that work by the Fed and other regulators on the Volcker Rule won’t be finished in time for its July deadline. Named for former Fed Chairman Paul Volcker, the Volcker Rule’s goal is to prevent banks from engaging in proprietary trading while also limiting their ability to invest in hedge funds and private equity. Bernanke said, “I don’t think it will be ready for July. Just a few weeks ago, we closed the comment period. We have about 17,000 comments. We have a lot of very difficult issues to go through, so I don’t know the exact date.” When asked by a committee member whether the rule would be proposed again, Bernanke avoided a direct response, instead saying that the Fed wanted to ensure that firms “have an adequate period of time to adjust their systems and comply with the rule.” When the committee member then expressed the view that the Fed wouldn’t be enforcing a rule that wasn’t officially in place, the chairman responded, “Obviously.”

After reporting a $2.4 billion loss for the fourth quarter of last year, government-controlled mortgage finance company Fannie Mae said today it will seek additional financial aid in the amount of $4.6 billion. The company, which together with its fellow government-run mortgage finance company Freddie Mac backs about half of this country’s outstanding mortgages, already has borrowed more than $116 billion in government funds. Both declining home prices and the “soured” loans Fannie Mae still has on its books from 2008’s housing crisis have made being profitable a challenge for the mortgage firm.

At 4:15 p.m. (CST), the APMEX precious metals spot prices were:

  • Gold - $1,697.10 – Down $90.30.
  • Silver - $34.68 - Down $2.51.
  • Platinum - $1,681.10 - Down $43.40.
  • Palladium - $703.90 - Down $17.30.

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Disclaimer:
APMEX’s ‘Market Reports’ provide our readers with a review of spot price activity and some of the factors that may be affecting the market for precious metals, three times during the trading day. While the information is obtained from sources we believe to be reliable, we do not guarantee its accuracy or its completeness and we encourage you to conduct your own investigation prior to making any decision based on the information. The "News and Commentaries" are not intended as a comprehensive discussion and there may be other factors that may be affecting the financial marketplace. These "News and Commentaries" are provided for informational purposes only and do not constitute a recommendation by APMEX to hold, to purchase or to sell any precious metal product. All orders, all purchases and all sales, if any, are subject to the terms of the User Agreement and other applicable policies.

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