Mid-Day Gold & Silver Market Report – 10/13/2011
IMF BACKS CHINA, EU STRESS TEST HAS LOTS OF VICTIMS
The downward movement of pricing for precious metals has continued since the Morning Gold & Silver Market Report. There were initial concerns over China’s import and export data and the European Union (EU)’s inability to convey a clear plan to tackle the continuing debt crisis. "The key here for gold is investors in 'paper gold' will stay away from the market, because they got burned because of having to put their money elsewhere to cover margin calls and the credibility of the euro is undermined, so they're going back into the dollar," said VTB Capital analyst Andrey Kruychenkov. "As far physical demand is concerned, it is supported ... gold joined the broader rally over the last week because people thought euro zone doesn't have many options. They will have to bail out, they will have to recapitalise banks, they will have to boost the European Financial Stability Fund, but it's enough fooling around. In a sense, people are frustrated that [euro zone leaders] don't have the coherent plan yet that they promised," he added.
China initially was thought to be facing a slowdown in their economic outlook based on import and export data that was just released. However, the International Monetary Fund (IMF) came out and said that China still has the scope to cover risks in the global economy. China is seen to be directly correlated to the U.S. and European debt crises, as they are a major exporting nation to those regions. China can help but is not viewed as a global economic savior.
The recapitalization talks in the EU will more than likely heat up based on a report released by Credit Suisse. The initial stress test back in July only showed 8 of 90 banks that would have issues, but thanks to the failure of Dexia, the data was re-run and 66 of the 90 banks would fail that stress test. The initial shortfall averaged around 2.5 billion euros back in July. Some of the bigger banks, like Royal Bank of Scotland, Deutsche Bank, and BNP Paribas would need a combined 47 billion euros based on new calculations. “We would see a bank recapitalization as a step in the right direction, although at this stage whilst the market is becoming increasingly optimistic, we remain cautious until further details” emerge, Carla Antunes-Silva, an Analyst with Credit Suisse, said. “We may see proposals over the coming days and weeks, but implementation may take longer than hoped for.”
At 12:00 PM (CT) the APMEX precious metals spot prices were:
- Gold - $1,665.60 – Down $19.00.
- Silver - $31.66 – Down $1.17.
- Platinum - $1,534.80 – Down $19.60.
- Palladium - $596.00 – Down $17.10.