Morning Gold & Silver Market Report – 11/16/2011

WILL GOLD BE THE ONLY WINNER IN THE EUROZONE CRISIS?

In an article today by Matthew Lynn for MarketWatch, Lynn presents a compelling case that gold may turn out to be the only winner in the eurozone crisis. In a scenario where sovereign bonds have been hammered, equities are neutral year-to-date with high volatility, eurozone banks are taking huge haircuts on Greek debt, and the euro is falling against other major currencies, where is it that money can go?

Some money has moved into Germany, as bond money from other eurozone countries seeks the safer shelter of German bonds. Money has been flowing into the German bond market, and Germany has benefited from the crisis. The question remains: With a debt-to-GDP ratio of 83.2%, is Germany really all that safe? The Spanish debt-to-GDP ratio is only 65%, and there is much concern about Spain’s solvency.

Some money has flowed into the U.K., which is viewed as a relative safe haven, but still with exposure to Europe. At first, money flowed into Switzerland, but the Swiss stepped in and took measures to prevent their currency from rising too fast. Money is moving to the emerging markets, but these markets carry their own risks, and they are small, so they can soak up only so much money.

Gold may turn out to be the big winner for these reasons. There are two probable results for the eurozone crisis. One is that the European Central Bank (ECB) will start buying eurozone bonds in massive amounts. The second would be the breakup of the euro currency, which would most likely be disorderly. Under these two probabilities, what might happen to Gold?

If the ECB starts printing money, it will need to do it on a massive scale. Most analysts would put this at $2 trillion euros at a minimum, but would the ECB stop there? As a sense of how large an amount that is, the Federal Reserve’s program of quantitative easing (QE) came to a total of $1.85 trillion, which is equivalent to 1.35 trillion euros. The European QE program could almost double the scale of the QE implemented in the U.S. As quantitative easing by the Federal Reserve drove gold prices up, it would be fair to expect quantitative easing by the EU would do the same.

If the second scenario comes into play and the euro currency breaks up, there will be even greater uncertainty in the market. Countries are unlikely to exit in an orderly fashion. Again, in this scenario, Gold prices would tend to go up.

At 8:30 a.m. (CST), the APMEX precious metals prices were:

  • Gold price - $1,765.60 – Down $18.40.
  • Silver price - $34.07 – Down $0.43.
  • Platinum price - $1,626.30 – Down $16.40.
  • Palladium price - $656.00 – Down $13.10.

« Return to Commentaries

Disclaimer:

APMEX’s ‘News and Commentaries’ 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.

US Dollar Prices are in USD

Precious Metal Prices
4/17/2014 5:15:48 PM EST

Metal Bid Ask Change
Gold $1,294.60 $1,296.60 ($8.90)
Silver $19.60 $19.70 $0.02
Platinum $1,405.70 $1,415.70 ($22.10)
Palladium $792.10 $797.10 ($6.20)
4/17/2014 5:15:48 PM EST

Click here for Historical Charts*All Charts are in USD


Sell To Us

Selling your bullion or collectible coins is very easy and safe with APMEX! We are one of the largest gold & silver dealers in the country. Read More



APMEX Reviews

Just a short note, I've been dealing with you for several years your products are excellent customer service top shelf, packaging delivery top notch, and a easy fun website to look at.

Kevin | January, 2014 View All

As seen on...