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Closing Gold & Silver Market Report – 3/7/2012

SOME HEDGE FUNDS REFUSING GREEK SWAP; QE3 MORE LIKELY?

In afternoon trading, prices of the four precious metals were pushed upward as markets reacted to private-sector job numbers and news that the Federal Reserve is considering a new program of bond buying. The Gold price broke a three-day downward trend, ending the day up by nearly $12. The price for the metal had dipped last week after statements from Federal Reserve Chairman Ben Bernanke seemed to quell chances of another round of quantitative easing. However, a Wall Street Journal report today indicated that the Fed was looking at an alternative bond-buying program, and investors responded by turning to the safe haven of Gold out of inflation fears. Dan Greenhaus, chief global strategist with equity trading firm BTIG, said, “To the extent we’ve taken additional easing out of market, this (Wall Street Journal article) put it right back in.”

Tomorrow night is the deadline for Greece’s private creditors to decide whether they will participate in a bond swap designed to avoid a disorderly and potentially contagious default. However, several hedge funds are boycotting the bond swap, and have threatened to take legal action if Greek policymakers don’t offer a better deal. Some hedge funds, in an effort to resist joining the swap, have bought a small number of foreign-governed Greek bonds. The total amount of the bonds is thought to be around 10 percent of the 200 billion euros that must be restructured as part of Greece’s bailout. Although the bond swap could likely continue even without the involvement of some hedge funds, the fear is that their efforts to obtain a better offer could result in a costly legal battle that would divert Greece’s attention away from dealing with that country’s economic issues.

In an interview today, the chief economist for global investment firm Goldman Sachs said that increased energy costs are beginning to adversely affect the U.S. economy.  Chief economist Jan Hatzius said, “I think we’re seeing some drag. We would say maybe a quarter to a half point (off Gross Domestic Product) from the increase in oil and gas prices seen since December.” Due to rising oil and gasoline prices and the sluggish labor market performance, Hatzius anticipates only moderate growth in GDP for the U.S. He said, “We think there’ll be some fiscal restraint. That’ll be more of an issue for 2013 than for 2012.” Hatzius said he believes the Fed will be careful with regards to monetary policy. He also said the Fed is “more likely than not” to engage in quantitative easing in the future. Quantitative easing in the past has been associated with increased inflation here in the U.S. as the buying power of the dollar drops. Gold and other precious metals historically have had a negative correlation with the value of the dollar.

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

  • Gold - $1,685.50 – Up $12.90.
  • Silver - $33.51 - Up $0.71.
  • Platinum - $1,633.10 - Up $20.20.
  • Palladium - $686.90 - Up $15.30.

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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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