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Closing Gold & Silver Market Report – 12/12/2011

QE3 AT WHAT COST?    

Gold prices closed at a seven-week low today as the optimism investors felt last week gave way to the more familiar feeling of anxiety about Europe’s debt crisis. Michael K. Smith of T&K Futures expressed the opinion that investors are saying, “ ‘All right, let’s just get out and wait till next year,’ ” pointing to the warning by Moody’s that Europe’s sovereign debt could experience a downgrade in the first part of next year as a key factor. Silver, Platinum, and Palladium also experienced price drops today.

Speculation is growing that if the U.S. economy experiences another slowdown in 2012, the Federal Reserve will enact a third round of quantitative easing (QE). However, a new analysis from Inger M. Daniels of CitiGroup, indicates that if a “QE3” is enacted by the Fed, the cost would be between $700 billion to $1 trillion. According to Daniels’ analysis, QE3 would likely involve a purchase by the Fed of $700 billion in mortgage-backed securities, with the possibility of $300 billion of Treasuries, as well, in an effort to drive mortgage rates below their already historically low levels. In his research note, Daniels said, “We believe this level of purchases would align with the Fed’s stated goals of aiding borrowers while not allowing for egregious Fed concentrated ownership of the mortgage market.” The Federal Reserve is set to meet Tuesday, and although there haven’t been any clues about whether such monetary easing is being planned, the subject is almost certain to be discussed during the meeting.

The news out of Mumbai is that more and more people are investing in Gold bars, so much so that sales of those bars in India are exceeding sales of jewelry. According to traders, even some investors who had bought Gold just a couple of months ago are using their savings to buy the precious metal in bars and coins. Dinesh Jain with the All India Gems and Jewelry Trade Federation, said, “Many consumers are buying coins and bars these days, and we have registered a 30% to 40% increase in sales from September.” Although jewelry continues to be popular, many traders say that the because of the extra costs that come with crafting jewelry, investors are turning to bullion items such as bars.

At 4:06 p.m. (CST), the APMEX precious metals spot prices were:

  • Gold - $1,667.00 - Down $47.80.
  • Silver - $31.34 - Down $0.90.
  • Platinum - $1,487.80 - Down $29.00.
  • Palladium - $660.20 - Down $26.30.

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APMEX’s ‘Market Reports’ 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.

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