Mid-Day Gold & Silver Market Report – 10/26/2011
DEADLOCK ON EU DEBT CRISIS HEIGHTENS FEARS OF NON-RESOLUTION
The concerns hitting the market since the Morning Gold & Silver Market Report continue to revolve around the deadlock involving the EU debt crisis inflicted by Greece and corporate earnings in the national markets. The safe-haven appeal of gold seems to have returned based on these economic fears. "The EU summit is a bit of a two-edged sword. If the package is deemed credible, that would have to bring down bond yields across euro zone countries but would also bring down the perceived credit risk, which is negative for gold,'' said Credit Suisse analyst Tobias Merath. "Now with the price jump we had yesterday, we have a bit more momentum, and the bigger picture for gold is that there will be no interest rate hikes due from any of the major central banks.''
The European Central Bank (ECB) has stepped in and said it would continue to buy troubled bonds. This measure is against what the German banks were hoping to get accomplished. A comprehensive solution is not expected from the summit scheduled for later today. This is the news coming in from incoming ECB President Mario Draghi. He was also clear to point out that this is only a temporary measure and put the onus of responsibility directly on the governments to come up with a solution to the continuing Greek crisis. In a speech in Rome, he said, "The Eurosystem (of central banks) is determined, with its non-conventional measures, to prevent malfunctioning in the money and financial markets creating an obstacle to monetary transmission.” Mario Draghi is set to take over the ECB on November 1. The write-down of debt, which is still a very large obstacle in talks, has ranged anywhere from 40-60%. German Chancellor Angela Merkel is aiming for a 50% write-down.
The stock markets have fluctuated through the day, erasing some of the gains made earlier in the day because of perceived confidence in the euro zone. "There are some questions about whether they will come up with something, and that lack of resolution is the main dampener for stocks," said John Carey, Portfolio Manager at Pioneer Investment Management. He also said, "In the face of all this macro uncertainty, corporate disappointments will get more attention than positive ones.” In an interesting sign of how volatile markets are at the moment, for every four stocks that rose, three fell on the New York Stock Exchange, and on the Nasdaq, declines outnumbered the gains.
At 12:00 PM (CT) the APMEX precious metals spot prices were:
- Gold - $1,728.30 – Up $26.00.
- Silver - $33.61 – Up $0.52.
- Platinum - $1,597.30 – Up $28.50.
- Palladium - $648.00 – Down $6.10.