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Morning Gold & Silver Market Report – 5/11/2012

JPMORGAN LOSS ROCKS FINANCIAL MARKETS   

Precious Metals prices were down in morning trading, largely on technical selling to cover positions, as financial stocks are reeling over the reported loss by JPMorgan. Speaking about Gold, Phillip Futures analyst Lynette Tan said, “The increase we saw yesterday was a bit of bargain hunting from a three-day losing streak.” However, other Precious Metals, such as Platinum and Palladium, are viewed as good investments at this time. In a note to its investors UBS wrote, “After some sizeable price declines, we can’t help thinking that both Platinum and Palladium look like good value here.”

In a financially shocking bit of news JPMorgan has reported a potential $2 billion loss from a failed hedging strategy. The dollar amount is not the shocking part; more shocking are the parties involved: Chief Executive Jamie Dimon and the normally risk-averse financial institution JPMorgan. Nancy Bush said, “Jamie has always styled himself as one of the kings of Wall Street. I don’t know how this went so bad so quickly with his knowledge and aversion to risk.” Analyst Todd Hagerman said, “It’s a pretty stunning admission for a company that prides itself on its risk management systems and the strength of its balance sheet. The timing couldn’t be worse for the industry. It will have ramifications across the broker-dealer community.” Dimon said, “It could cost us as much as $1 billion or more. It is risky, and it will be for a couple quarters.” He added, “This puts egg on our face.” JPMorgan has been viewed as a very safe financial institution, considering it was one of the only companies to not post a loss from the 2008 financial collapse.

JPMorgan’s admission has caused stock markets to open much lower. By assets alone, JPMorgan is the nation’s biggest bank. Investment officer Walter Todd of Greenwood Capital said, “It’s a black eye for JPMorgan,” said Michael Shaoul, Marketfield Asset Management’s chairman. “It was considered to be one of the better big banks. … JPMorgan will be in a weaker position.” However, American banks still are viewed as being much more liquid than their global counterparts. Billionaire investor Warren Buffett said, “I would put European banks and American banks in two very different categories. The American banking system is in fine shape. The European system was gasping for air a few months back.”

At 9:02 a.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold - $1,583.80 – Down $12.50.
  • Silver - $28.70 – Down $0.53.
  • Platinum - $1,468.40 – Down $26.40.
  • Palladium - $603.60 – Down $12.80.

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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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