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Morning Gold & Silver Market Report – 1/26/2012

GOLD, SILVER CONTINUE TO EXTEND GAINS  

Gold and Silver prices began Wednesday morning in negative territory, but this changed immediately upon yesterday’s Federal Reserve announcement. The Federal Reserve announced that it would extend low interest rates well beyond 2013, to at least the end of 2014. Fed Chairman Ben Bernanke also made it clear that if further stimulus is necessary, the Fed is prepared to act. Gold climbed over the $1,700 mark, and Silver crossed into $33-per-ounce territory. Today, the Gold price is up about $60 from Wednesday’s opening. Why did Gold react this way to the Federal Reserve announcement?

· If the Federal Reserve is extending interest rates, it is a clear signal that it is concerned with the pace of economic recovery. Therefore, investors see a need to allocate a portion of their portfolios to a safe-haven asset class such as Gold.

· Lower interest rates mean that Treasury Bills will continue to pay low rates. Treasury Bills are safe-haven investments, but low interest rates will cause money to move to other safe-haven investments, such as Gold. It will also cause money to move into risk assets such as stocks.

· When the Fed talks about being prepared to take further action, it is referring to another round of quantitative easing (what is being called QE3). In the past, quantitative easing has devalued the dollar, stoked inflation fears and turned out to be bullish for Gold.

Jobless claims rose more than expected last week. Economists’ expectations were 370,000; today’s report shows 377,000. Although not good news, there is some satisfaction in that the number remains less than 400,000. The just-released durable goods report gives us some positive news. With a 3 percent rise, it beat expectations, which means that factory orders for long-lasting manufactured goods increased more than economists’ projections.

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

  • Gold - $1,729.60 – Up $28.00.
  • Silver - $33.63 – Up $0.43.
  • Platinum - $1,619.70 – Up $39.10.
  • Palladium - $700.60 – Up $6.30.

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Disclaimer:
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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