Closing Gold & Silver Market Report – 2/24/2012
GREEK FALLOUT NIPS INVESTOR CONFIDENCE
There is an unintended consequence of restructuring the Greek debt that has not received a great deal of attention. To put it simply, private bond investors are going to be more cautious and more demanding when they look at other sovereign debt. If they can be forced to take big losses in Greece, then they could be forced to take large losses in other debt-ridden countries such as Spain, Portugal, Italy and Ireland. It makes matters worse when this restructuring does not trigger the insurance payments (credit default swaps) investors purchased to protect these investments. It is a concern that going forward, private investors will either avoid sovereign bonds or demand higher interest rates to compensate for the higher risks. Either way, it sets up a scenario whereby already debt-ridden countries might have their borrowing costs significantly increased.
Gold and Silver prices moved sharply up this week. Most of this movement has been credited to the deal struck to restructure the Greek debt, thus opening them up for another bailout. However, there is some thought that this movement can be attributed to Greece getting out of the spotlight, allowing even more serious concerns to come front and center. The Economic Cycle Research Institute (ECRI) is sticking by its prediction calling for a U.S. recession in the coming months. The European Committee is forecasting a recession in the eurozone. There is no easing of tensions between Iran and Israel, and oil prices are going up. Greece has been getting a lot of our attention, but it might be the least of our worries.
At 4 p.m. (CST), the APMEX precious metals spot prices were:
- Gold - $1,773.40 – Down $11.90.
- Silver - $35.44 – Down $0.18.
- Platinum - $1,714.50 - Down $9.50.
- Palladium - $712.30 - Down $7.10.