AUTOMATIC SPENDING CUTS TO START; RECORD EXIT FROM GOLD ETFS
The Dow Jones Industrial Average reached a five year high on Wednesday, just days before mandatory spending cuts are set to take effect. Both White House and Congressional leaders seem content to let Friday’s deadline come and go, each poised to blame the other party for the cutback. The main issue to be resolved is the “broad-brush” spending cuts, known as the sequester. Both President Barack Obama and Congress have agreed to the sequester, which takes effect over the next several months if not resolved sooner. The heart of the matter is tax revenue and spending. January’s tax deal that delayed the argument till tomorrow was only a small piece of the larger picture.
The world’s largest Gold exchange-traded fund, which issues securities backed by physical Gold, is New York’s SPDR Gold Trust, founded in 2004. February was a record month for the trust as it has seen a record selling of holdings. One of the drawbacks of an ETF is their high visibility in the market, and their influence on investor confidence may be blown out of proportion. For example, when high profile investors liquidate their positions, selling can quickly gain momentum. Bank of America-Merrill Lynch analyst Michael Widmer said, “In the last few years you've seen more and more players with a shorter-term investment horizon playing the Gold market through the ETFs.”
At 9:00 a.m. (EST), the APMEX Precious Metals spot prices were:
- Gold, $1,593.80, Down $3.40.
- Silver, $28.97, Down $0.04.
- Platinum, $1,601.00, Down $0.10.
- Palladium, $744.60, Up $0.00.
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