Weekly Gold & Silver Market Recap – 11/21/2012
GOLD HOLDS STEADY IN AN ABBREVIATED WEEK
With Thanksgiving on Thursday, this was a short week for the Precious Metals market in the United States. The attention is still focused squarely on the fiscal cliff and the U.S. lawmaker’s ability to avoid it. Congressional leaders and President Barack Obama have publicly stated their optimism for a deal on the nation’s financial situation after only a few hours of talks last week before the president left for a three nation tour. The president reiterated his views Sunday in Bangkok where he said, “I am confident we can get our fiscal situation dealt with.” Traders seized on that sense of hope and drove prices up slightly on Monday. Even with the positive talk from U.S. leaders, analysts believe a solid resolution to the crisis could temporarily push down Gold prices. However, extremely low interest rates are prevalent and projected to stay low for the foreseeable future, causing inflationary fears. This concern is positive for the outlook of Precious Metals. The small gains made in the Gold price on Monday were lost when Federal Reserve Chairman Ben Bernanke gave his report to congress. The main speaking points regarded the fiscal cliff and the debt ceiling. With nothing new being said, there was no reason for much movement in the Precious Metal markets. Bernanke said that the current quantitative easing program will be ongoing until there is marked improvement in the economy. Those kind of neutral statements leave little to no clarity to when the easing may end. On the topic of the fiscal cliff, the Chairman Bernanke stated the obvious, “A failure to reach a timely agreement this time around could impose even heavier economic and financial costs.”
GLOBAL ISSUES ABUNDANT
After eight days of fighting, there has been a cease-fire agreement reached in the Israel-Gaza conflict. The agreement was reached Wednesday by the two parties involved and was mediated by Egyptian President Mohamed Morsy and U.S. Secretary of State Hillary Clinton. The news sent both the U.S. stock market and price of Gold up. In Europe, the economic news continues to bring down the outlook of the region’s recovery. One of Europe’s historically strongest economies is showing signs of weakness. France has lost its AAA credit rating, and some economists are wondering now if the eurozone’s second largest economy is in jeopardy. France’s credit downgrade also comes with a negative outlook for the country’s financial future by Moody’s Investors Service. Guillaume Menuet of Citigroup wrote, “Given persistent downside risks to economic activity, we continue to forecast a mild (gross domestic product) contraction of 0.2 percent in 2013, with the 3 percent of GDP budget deficit target likely to be missed.” While the reports on the French economy are starting to surface, the economic issues in Greece are well know and ongoing. European finance ministers are working to cut the debt while keeping the peace in the region. The first matter of business is to approve loans for Greece and look for ways to cut that country’s debt. “The Eurogroup this evening will take the necessary decisions to ensure the debt sustainability of Greece. It's essential that we will be able to decide on a set of credible measures on reducing the debt burden of Greece tonight. We must still reach an understanding on several details and I would expect that the chances are good that we will come to a final and joint solution this evening. But I'm not entirely certain,” the chairman of the eurozone finance ministers, Jean-Claude Juncker, said Tuesday. While there is no timeline set for this to be agreed upon, all sides agree the sooner the better.