Closing Gold & Silver Market Report – 12/22/2011

EXPERTS SEE GOLD’S CONTINUED RISE; PAYROLL TAX SNAG COULD SLOW ECONOMY

Although the price of Gold experienced a drop in the latter part of this year, falling by 13% in September and by 8% last week, most experts are unfazed and see the precious metal rising again in 2012. Jeffery Wright, a senior research analyst with Global Hunter Securities, recently said, “What I am looking for is a Gold price of $1,800 an ounce in 2012,” adding that spikes to $1,900 or $2,000 are likely if Washington lawmakers continue to be at odds on how to address fiscal problems in the U.S. Wright said, “Once we get back into those discussions, there will be further pressure on the U.S. dollar and a refocusing on Gold as a safe-haven asset.” Meanwhile, metals and mining analyst Leo Larkin of S&P Capital IQ predicted that Gold could see a price of $1,900 in the coming year. He said, “Gold has been going up without interruption for 10 years.” Larkin said the current dip in prices as a “totally normal” correction, and he expects this upward trend to continue in 2012. Over the past 10 years, Gold has risen an average of 17% annually.

Analysts are warning that if Congress cannot reach agreement on extending the payroll tax cut and unemployment benefits by the Jan. 1 expiration date, the end result could be a slowdown in the growth of the U.S. economy of nearly a full percentage point in the coming year, as well as a sharp drop in stock values. Nomura economist Lewis Alexander said, “If the payroll tax cuts revert to their 2010 levels and unemployment benefits are not extended, we think that U.S. GDP growth in 2012 could be depressed by roughly 0.8 of a percentage point, implying growth of just 1.5 percent versus our current forecast of 2.3 percent.” Earlier this week, congressional Republicans rejected the short-term payroll tax cut extension that was passed in the Senate after Republican-requested cuts were removed from the bill. The Senate has adjourned for the Christmas holiday, and the worry is that lawmakers in Washington will be unable to come to an agreement in January. Phoenix Partners Group’s Michael Block said, “If they really screw this up, we could retest those October lows below 1,100 for the S&P 500 index.”

At 4:14 p.m. (CST), the APMEX precious metals spot prices were:

• Gold - $1,606.90 - Down $6.70.
• Silver - $29.13 - Down $0.15.
• Platinum - $1,427.00 - Down $5.70.
• Palladium - $656.10 - Down $21.10.