Morning Gold & Silver Market Report – 12/6/2011
OPTIMISM ABOUNDS, BUT SO DOES DOMINO EFFECT
Precious metals prices were slipping this morning due to worries over the European debt crisis. Gold, specifically, is still widely regarded as a safe-haven asset, though recently it has moved in line with other assets (such as stocks) as investors use the metal as an insurance policy. When investors suffer losses in the stock market, they sell some of their gold position to make up for those losses. Today, however, gold’s losses have been limited by a rebound in the euro.
U.S. stock futures are pointing to a positive open today, as optimism spreads that eurozone leaders will come up with a concrete plan to shore up the debt crisis. Some investors believe that Standard & Poor’s (S&P) downgrade warning to 15 European countries yesterday will help that process along. Rick Meckler, president of LibertyView Capital Management, said, “There’s an idea the S&P warning is likely to push the EU to work harder at solving its debt crisis. The warning may have the impact of pushing forward the solution without having to be an actual problem to the market.”
Author Satyajit Das wrote a commentary for Marketwatch in which he explained why “we’re all part of the eurozone now.” Expounding upon the interconnectedness of the global economy, he wrote, “What happens in Europe will not stay in Europe. The shock will be rapidly transmitted through trade, investment and the financial system to the rest of the world. … It may truncate the nascent U.S. economic recovery.” Das cited some numbers, as well. “If the International Monetary Fund gets involved, Americans will bear around 16% of the bill for any European bailout.” China’s exposure is large, but Das explained why the U.S. and Europe go hand-in-hand. “The U.S. and Europe account for around 40% of world GDP and 25% of its trade. They also make up around 60% of direct investment flows and 60% of financial assets. Europe and the U.S. are each other’s most important market for goods and services.”
At 8 a.m. (CST), the APMEX precious metals spot prices were:
- Gold – $1,708.00 – Down $24.50.
- Silver - $31.76 – Down $0.60.
- Platinum - $1,508.20 – Down $25.30.
- Palladium - $636.50 – Down $10.10.