Closing Gold & Silver Market Report – 1/13/2013
WHITHER THE EU ECONOMIC CRISIS? DOWNGRADES AND STANDOFFS
Precious metals prices have begun to rebound, as prices have climbed since the Mid-Day Gold & Silver Market Report. The dollar’s increase against the euro today has caused investors to cash in on the profits, selling the precious metals positions. Standard & Poor’s announcement of a downgrade to France’s credit rating has created more of a need for safe-haven investments. Anne-Laure Tremblay, an analyst with BNP Paribas, said, “Gold tends to be supported by mild to strong risk aversion. However, (when) risk aversion rises to very high levels, Gold tends to be sold off alongside risky assets.”
The crux of the issue that is creating the havoc in European markets is the lack of resolution in assisting Greece. The downgrade of France and Austria at this point places any bailout proposition in further risk. Also facing a credit rating downgrade are Slovakia, Spain and Italy. These downgrades can directly affect any power the European Financial Stability Facility (EFSF) has in funding a rescue. Germany will retain its top rating, but the other downgrades could reduce the lending capacity of the EFSF by up to one-third. However, downgrades don’t necessarily have the same sting. This was echoed by French Finance Minister Francois Baroin, who said, “It’s a reduction of one level. It’s the same level as the U.S. … It’s not a catastrophe.”
American markets also have been affected by the downgrade in Europe, as attention returns to the eurozone crisis. The downgrade “is going to destabilize lot of those funding packages because they are all based on the AAA rating, and now you are going to have AA+ for France and Austria, and maybe down two notches for Italy. If you get a weak recession or deep recession in Europe, it is going to hurt our companies and bring our market right back down,” said Alan Valdes, director of floor operations for DME Securities.
At 4:01 p.m. (CST), the APMEX precious metals spot prices were:
- Gold - $1,640.20 – Down $8.50.
- Silver - $29.79 – Down $0.41.
- Platinum - $1,494.90 – Down $4.20.
- Palladium - $639.00 – Down $3.20.