Closing Gold & Silver Market Report, 7/12/2012
STRONG DOLLAR WEIGHS ON PRECIOUS METALS
An appreciating American dollar has been good for those with cash savings, but it has pushed down other investments lately. Today was no exception. Gold ended the day slightly down after recovering early losses. Stocks dropped for the sixth straight day Thursday, indicating traders’ hesitancy to invest in equities in a climate where American exports could be in trouble due to currency exchange rates. A weakening euro has led investors to seek assets denominated in other currencies, and since the American dollar is the most traded currency in the world, its liquidity and safe haven appeal has caused it to outperform most of its peers. As the dollar gains strength, it takes fewer dollars to buy an ounce of metal (or almost any physical asset, for that matter), causing the price of that metal to fall.
After poring over Spain’s austerity and bank bailout plan, many analysts are saying that it only buys time for the ailing country and does little or nothing to alleviate the problems plaguing the highly indebted nation. Furthermore, some are wondering if Spain can even follow through with the austerity measures it has promised. “We doubt whether the envisaged 65 billion euros in fiscal savings will be realized in full,” Dutch brokerage ING stated. In a nation where one in four are unemployed, the population could be extremely resistant to more cuts in government spending. The Spanish government is expecting a prolonged recession, saying it has little hope for any economic growth before the end of 2013. Analysts are expecting the current plan to lead to a recessionary spiral, where austerity measures lead to economic contraction, reducing government revenues and therefore triggering the need for more austerity measures.
At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1,573.30, Down $3.90.
- Silver, $27.25, Up $0.15.
- Platinum, $1,418.50, Down $13.10.
- Palladium, $580.10, Down $3.90.
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