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Closing Gold & Silver Market Report – 6/8/2011

THE PRICE OF TEA IN CHINA

Precious metals were still trading lower today despite the negative results of the OPEC meeting. Could it be that the effects of this meeting just haven’t been felt yet? Historically, higher oil prices mean higher gold prices. Bernanke’s speech yesterday was received with mixed feelings. On the one hand, he did not hint at another QE which kept precious metals trading lower, while on the other hand his comments were still not positive. World stocks also reacted to Bernanke’s speech, as well as news coming from Europe of a bleak global economic outlook by falling for the sixth day in a row. The U.S. dollar hit another low for the month against the yen, but actually rallied against the euro on news out of Germany of weaker-than-expected economic data and the ongoing discontentment with the Greek bailout.

There is also news that 4 of the 12 Federal Reserve districts are growing at a very slow pace. These results were released in what is known as the Beige Book, released yesterday, which is the central bank’s latest survey of economic conditions. The ones with the slowest growth were Philadelphia, New York, Atlanta, and Chicago regions, while Dallas was the only region that showed accelerating growth.

Does the U.S.’s financial decisions have a global impact? The headline that ran in the China Daily, “End of QE2 to help China tame inflation,” may help explain how the other countries are impacted by the actions of the U.S. Lai Pingyao, a professor of economics at the University of International Business and Economics in Beijing, was quoted to say, “The commodity prices in China will be stabilized and capital may flow back to the U.S. if the Fed starts to tighten its monetary policy, which will be very helpful in relieving China's imported inflation...the inflow of U.S. ‘hot money’ will be gradually weakened by the termination of QE2.” The article goes on to explain how if the U.S. monetary policy is tightened then the dollar would gain value yet again (or at the least, stop devaluing) which would make it easier for the Chinese renminbi to fall against the dollar on its own rather than have China printing money, which in turn would reduce inflation.

This just goes to show how interconnected we all are financially.  If China is this interested in something as “simple” as the end of QE2 since it so directly affects them, what should we, as a nation and individuals, be aware of abroad?  The debt crisis in Greece?  The decline of the euro due to the European debt crisis? Maybe the question should be: What does the price of tea in China have to do with me?

At 4:00 PM (CT) the APMEX precious metals’ prices were:

  • Gold price - $1538.80 (down $5.70)
  • Silver price - $36.88 (down $0.26)
  • Platinum price - $1,826.20 (down $5.50)
  • Palladium price - $807.00 (down $4.50)

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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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