Mid-Day Gold & Silver Market Report – 12/8/2011
TIME NOT ON EUROPE’S SIDE
Precious metals and U.S. stocks were down in morning trading. The market change resulted from the interest rate announcement from the European Central Bank (ECB). The market was hopefully awaiting the news that the ECB would begin to aggressively buy bonds. However, ECB President Mario Draghi announced the opposite. When bonds are purchased assertively, it pushes cash into the system, but this currently is not an option. The ECB has been restricted from printing more money by the EU treaty that formed the central bank. Commenting on Draghi’s statements, Commerzbank chief economist Joerg Kraemer said, “Draghi had no choice but to dampen hopes for more aggressive bond purchases, as otherwise he would have taken away pressure on the EU summit to decide on the necessary reforms of the currency union.”
Gold prices are a reflection of how the eurozone financial crisis is being handled. Standard Bank Pic’s Walter de Wet said, “European banks especially are having liquidity funding problems, which does see a lot of lending of Gold, and that’s putting downward pressure on lease rates. Funding problems will continue for a while.” The debt crisis affecting Europe started more than two years ago. The ECB’s meeting today is the fifth comprehensive summit in the past 19 months. On that note, it is difficult to assume that time will stay on Europe’s side. UBS AG analyst Edel Tully acknowledged how banks are handling their positions with Gold (which is affecting its price), saying, “It is quite typical of this time of year that banks look to offload metal in an effort to reduce their balance sheet.”
The U.S. labor market seems to be insulating itself from any possible negative effects spawned from the European crisis. The U.S. economy is growing despite a global epidemic that is occurring. TD Securities chief economist Eric Green said, “The downtrend in (jobless) claims remains intact, reinforcing the improving underlying fundamentals in the U.S. economy, which now looks to be outperforming most regions of the world, including China, on a relative basis. However, good news can turn bad quickly if the euro crisis takes a turn for the worse.”
At noon (CST), the APMEX precious metals spot prices were:
- Gold - $1,709.40 – Down $33.40.
- Silver - $31.54 – Down $1.08.
- Platinum - $1,496.40 – Down $26.60.
- Palladium - $673.60 – Down $11.80.