Morning Gold & Silver Market Report, 5/29/2012

GOLD PRICES TIED TO EURO, DOLLAR STRENGTH  

Through the weekend, Precious Metals prices have remained relatively even, but prices took a quick jump as American markets opened. Precious Metals prices tracked a bit higher as the euro continued to climb back from a nearly two year low against the dollar. Both currencies are susceptible to the ongoing eurozone debt crisis. Commodities consultant Peter Fertig said, “Gold will be in a critical position at least until the Greek general election taking place on June 17. … Should there be a majority for a government led by the conservative New Democracy, chances are quite good that Gold would rebound. That would also support the euro, it would support stock markets.”

The strength of the dollar is evident as its accessibility as a high quality asset continues to shrink. Since July 27, the dollar has climbed against the other 16 major currencies. International investors and financing institutions that can only own high grade assets are finding a much tougher time locating quality investments that are not backed by the dollar. Ken Dickson said, “We’re seeing many more periods of dollar buying during these uncertain times.” Hungarian bank president Andras Simor said, “The number of euro-denominated assets that meet our quality standards has dropped radically. More and more securities were dropped from our portfolio as the credit grade of more and more countries fell below the single A category and as more and more securities don’t meet our market quality requirements.”

Meanwhile, European companies have already begun preparing for a Greek exit from the euro. Some companies not only are planning for a change to the new drachma, but also preparing in the event of civil unrest, looting and getting cash out of Greece as potential exposures. Roger Bayly said, “Most companies are getting ready and preparing for a Greek exit and have looked at cash, treasury and currency issues.”

At 9:06 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,581.00, Up $10.30.
• Silver, $28.59, Up $0.11.
• Platinum, $1,442.10, Up $13.60.
• Palladium, $611.60, Up $19.80.

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