Mid-Day Gold & Silver Market Report – 05/17/2012

Brandi Brundidge

5/17/2012 12:17:00 PM

GOLD GETS PHYSICAL; DOLLAR CONTINUES GAIN  

Precious Metals prices have rebounded strongly across the board today as the recent price drop has attracted physical buyers. While the uncertainty in Greece continues to put pressure on the euro, the coming expiration of Gold options on the COMEX is helping lift prices as well. “Since yesterday, we have seen more interest come through from physical buyers … because prices have come down substantially,” said Afshin Nabavi at MKS Finance. “But there is more upside than downside risk for Gold at the moment as the political situation is very jittery with tension in Iran and economic problems especially in the eurozone. People will want to buy physical Gold again.”

While the Spanish government denied a run on deposits at Bankia SA, Spanish banks across the board are looking at having their credit ratings downgraded by Moody’s later today. People familiar with Moody’s plan indicate that growing loan defaults and the reduction in the ability of the government to support lenders are some of the driving factors in the downgrade.

The American dollar has marked its 14th day of positive gains as the turbulence continues to grow around Greece and Spain. This marks the longest stretch since 1985, however the dollar has moved off its high today based on poor manufacturing data for the Philadelphia region. This drop in manufacturing could be seen as a sign that the economy is slowing, and could prompt the Federal Reserve to take action. “As long as the Fed is not expanding its balance sheet the inflation scare surrounding unorthodox actions will be seen to be exaggerated,” said Alan Ruskin at Deutsche Bank. “There is a pretty good chance that any further Fed action based on a weaker economy will not involve balance-sheet expansion. I also expect that the euro story will soon be back in the headlines trumping any U.S. data story, and this will remain at its core dollar-positive,” he said.

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold - $1,578.10 – Up $40.00.
• Silver - $28.26 – Up $0.99.
• Platinum - $1,455.60 – Up $21.40.
• Palladium - $607.00 – Up $10.90.

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