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Closing Gold & Silver Market Report – 1/12/2012

GOLD PRICE CLIMBS ON WEAK DOLLAR, EUROZONE RISKS   

Gold prices climbed for a third straight session today, helped by both a weaker U.S. dollar and the safe-haven investments spawned by a warning from the European Central Bank (ECB) that the eurozone’s outlook included “substantial” downside risks. Mike Smith, president of T&K Futures and Options, said, “The dollar appears to have peaked last week, and people are buying Gold as a hedge.” After a decision by the ECB not to change its key lending rate, ECB President Mario Draghi warned of the downside risks to the economic outlook, including increased debt market tensions. “Uncertainty is very high,” Draghi said. Silver and Platinum tracked Gold’s climb, ending the day with gains, as well.

Hedge funds appear to be heading for a standoff over the Greek bailout plan. The current plan requires that Greece’s creditors voluntarily take a 50% loss on bond holdings, but some hedge funds are indicating they may opt out of the plan in the hope that Greek politicians will avoid political embarrassment by letting the funds get away with it. Greece is preparing to start final talks that could affect whether that country stays in the eurozone. Without the current deal, lenders around the world will be unwilling to bail out Greece a second time, and Greece is likely to default on its financial obligations sometime in late March. One hedge fund manager was quoted as saying, “I think we’ll hold out. People are so slow in Europe, and by the time they’ve got everything in place logistically, this might be the one window where investors might be paid back in full.”

Transcripts released today of Federal Reserve policy meetings show that as late as December 2006, top Fed officials including Chairman Ben Bernanke believed that the housing market was stabilizing and failed to anticipate the subsequent housing crash. According to transcripts, Fed policymakers were seemingly oblivious to the threat housing represented to financial markets and the economy. Earlier in 2006, in his first meeting as the Fed’s chairman, Bernanke said, “We are unlikely to see growth being derailed by the housing market.” Even when home prices and sales experienced an extended drop later that year, the view of Fed officials was that the worst was over, the transcripts show. The housing market’s crash resulted in a U.S. banking crisis and the biggest recession this country has seen since the Great Depression, as well as a corresponding increase in the price of Gold.

At 4:10 p.m. (CST), the APMEX precious metals spot prices were:

  • Gold - $1,651.30 - Up $10.70.
  • Silver - $30.31 - Up $0.35.
  • Platinum - $1,500.10 - Up $3.40.
  • Palladium - $638.40 - Down $8.30.

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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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