Mid-Day Gold & Silver Market Report – 3/14/2012

Timothy Oakes

3/14/2012 12:09:00 PM

PRECIOUS METALS TUMBLE; ECONOMY IMPROVING?

Precious metals prices have reacted to Tuesday’s meeting of the Federal Open Market Committee (FOMC). Late Tuesday afternoon, prices began to drop. Prices leveled a bit this morning but have started falling over the course of this morning. Saxo Bank’s Ole Hansen said, “We saw the 10-year (U.S.) government bond yield breaking out of the holding pattern it’s been trading in for the last five or six months. That’s one of the precursors to a change in rate sentiment. … Knowing how dovish the Fed — especially (Federal Reserve Chairman Ben) Bernanke — is, for him to say we’re seeing growth is surprising. So, removal of quantitative easing and a higher rates forecast is not good for Gold in the near term.” But not all analysts hold the same view, with some saying the pricing actually makes Gold a good, supported value. Standard Bank’s Walter de Wet said, “As far as real interest rates are concerned, we believe that they will remain low for some time to come. The futures market agrees. Even the Fed has indicated that they will keep rates very low for some time. … This should keep real interest rates in negative territory. At the same time, economic conditions may indicate that the Fed funds rate is too low. Such a mismatch has in the past proved quite bullish for Gold.”

The messages from the FOMC were perceived as a mixed bag by a number of investors and analysts. Though the message maintained the position previously stated during Bernanke’s trip to Congress, some investors and analysts maintain a third round of quantitative easting is not entirely off the table. Chief economist Stephen Stanley said, “The way the statement was crafted was to keep their options open. … What they’re trying to tell us is ‘Hey, don’t change your policy outlook, because we’re not ready to say things have changed enough.’” Bill Hampel reinforced that opinion when he said, “They want to keep their powder dry in case they need to take further action later in the year. … In case they need to do a QE3, this is giving them leeway to do it if they think it’s necessary later in the year.”

The price of goods imported into the U.S. rose less than forecast in February, paced by the biggest drop in food costs in three years. While economist had projected a 0.6 percent increase, the actual 0.4 percent gain amounts to little change from January’s numbers, according to the Labor Department. “Once you look past the rise in oil, import prices are pretty tame on the back of the dollar strength we’ve been seeing recently,” said Joshua Shapiro at Maria Fiorini Ramirez Inc. in New York. “This points toward pretty-well-controlled nonenergy costs.”

At 12:01 p.m. (CDT), the APMEX precious metals spot prices were:

• Gold - $1,649.00 – Down $46.20.
• Silver - $32.32 – Down $1.30.
• Platinum - $1,678.00 – Down $24.80.
• Palladium - $696.40 – Down $12.50.