Morning Gold & Silver Market Report – 11/21/2011

CENTRAL BANKS BUYING MORE GOLD; SUPER COMMITTEE DEFEATED

Gold is trading lower than Friday’s close this morning, as U.S. stocks are bracing for a steep drop. The focus on Europe will likely shift to the mounting debt issues in the U.S. this week, as the congressional Super Committee faces a deadline Wednesday. The bi-partisan committee will need to agree on a plan to lower the U.S. deficit by $1.2 trillion over the next 10 years by Wednesday before an automatic cut comes equally from defense and domestic spending. If the Super Committee does not agree on a plan, it could be a bad sign to credit rating agencies that policymakers are not on the same page. If the Super Committee does come up with a plan, the policymakers will treat it as a victory, instead of focusing on the additional trillions of dollars in cuts the U.S. still needs to make. Reports are now suggesting that the committee has accepted defeat and will not be reaching an agreement.

The central bank of India’s gold holdings are at an all-time high. The bank recently bought $6.7 billion of gold from the International Monetary Fund, but it is not looking to stop there. The bank has advised the Indian government to purchase more gold, stating in a paper, “India’s purchase of gold as a diversification strategy is fully justified and is in line with the global trend. There is scope to increase its holding.” Howard Ward, portfolio manager of the GAMCO Growth Fund, was asked on CNBC if he believes gold could rise above the $2,000 level. He responded, “The case for gold remains intact. … The central banks are buyers! It’s all lined up for further gains. … I’m not making the case that it is (going above $2,000), but I think it will. … Gold could rip right through $2,000 in a matter of a few weeks.”

The Socialist party in Spain became the fifth government in the eurozone to be ousted as a result of the debt crisis, following Greece, Ireland, Portugal, and Italy. Ten-year bond yields in Spain continue to creep closer to the 7% “danger zone,” and the election did little to calm markets. Ward added his two cents to the European situation as well, saying, “Fourth Quarter’s going to be a recession in Europe, there’s no doubt.”

At 8:06 a.m. (CST), the APMEX precious metals spot prices were:

• Gold - $1,715.50 – Down $11.60.
• Silver - $31.34 – Down $1.12.
• Platinum - $1,570.40 – Down $18.30.
• Palladium - $596.00 – Down $11.20.