Morning Gold & Silver Market Report – 9/20/2011
S&P Cuts Italy’s Rating – Gold Prices Climb – Standard & Poor’s (S&P) cut Italy’s debt rating yesterday on concerns that the on going debt crisis will raise borrowing costs throughout the euro zone. This move surprised many and only puts more pressure on policymakers to lead. The chief commodity analyst at Oslo based SEB AB sees gold prices going higher until political leaders implement effective action. Bjatne Schieldrop also said, “Under current circumstances, a long position in gold is highly recommended.”
News of Italy’s downgrade had the immediate effect of driving world equity markets down and U.S. stock futures lower. However, this has turned and U.S. stock futures are pointing to a positive open largely due to expectations built around the two-day Federal Open Market Committee (FOMC) meeting that begins this morning. Most traders are expecting the FOMC to announce an “Operation Twist”, which means they would sell short-term bonds to turn-around and purchase long-term bonds. The theory is that by providing cheaper long-term money, businesses will use that opportunity to borrow and invest, thus stimulating the economy and creating jobs. As with most Fed policy proposals, it has both strong proponents and opponents.
Greece is still in talks with the European Union (EU) to secure funds that would keep them from running out of cash in October. Government officials are promising to reduce a bloated public sector. In other words, the Greek private sector can no longer be expected to support the huge body of government workers. Skeptics point out that this body of government workers has been built up over 30 years, and they will not go quietly. To date, Greek government officials have been long on pledges, but short on action and this is causing international leaders to begin to lose patience.
Breaking News: August Housing Starts Fall More than Expected - At 8:30 AM (ET), the Commerce Department reported that housing starts fell by 5%, which is the largest decrease since April. Economists polled by Reuter expected a decrease of 11,000 units, but it fell by 30,000 units.
At 8AM (CT) the APMEX precious metals prices were:
- Gold price - $1,780.80 – up $3.40
- Silver price - $39.40 – up 22 cents
- Platinum price - $1,778.20 – up $3.20
- Palladium price - $722.00 – up $6.00