Closing Gold & Silver Market Report – 6/13/2011
INVESTORS CASH OUT THEIR INSURANCE POLICIES – After Friday’s huge drop in stock markets, investors sold off holdings in gold and other precious metals today to cover losses from six straight weeks of stock market losses. When investors buy on credit (called “leverage” or “margin”), they run the risk of a margin call if their losses get too big; that is, their bank can call them and demand money for the losses. This can cause selloffs in safe haven assets like gold, even in times where traditional logic would predict upward pressure due to safe haven buying. We saw a similar event a few months ago following the earthquake in Japan. Essentially, investors are using gold like an insurance policy, and it’s doing exactly what it’s supposed to do: Protect your assets when you have a loss.
All eyes are now on China. The industrial powerhouse and home to one of the world’s fastest growing economies seems to be losing steam. We are due for a new economic report from China tomorrow, where futures on the benchmark stock index are down ahead of the release. China’s leaders may now face a critical decision: To raise interest rates in order to curb inflation or keep them low to stimulate the economy. This is classic stagflation, and the US may soon have to make the same rock-and-a-hard-place decision.
At 4:08PM (CT) the APMEX precious metal prices were:
- Gold price - $1,516.90 (down $12.80)
- Silver price - $34.85 (down $1.57)
- Platinum price - $1,802.00 (down $32.00)
- Palladium price -$797.00 (down $22.30)