Morning Gold & Silver Market Report, 5/30/2012

Ryan Schwimmer

5/30/2012 8:00:00 AM

TROUBLED SPAIN MIGHT EXIT EUROZONE  

American stock futures and Precious Metals are trading lower this morning in the wake of another credit rating downgrade in Spain. Borrowing costs in that country soared, and it has now become a matter of when, not if, a bailout will be necessary. Reports are also showing that the European Central Bank has rejected Spain’s plans to recapitalize Bankia SA, its largest bank, which put a dagger in sentiment. This news drove up the American dollar, while Precious Metals have been pushed down.

A quick look at the headlines on CNBC’s website confirms that most of the focus is on the eurozone. One headline is particularly interesting, with an analyst suggesting that Spain could exit the eurozone before Greece. For Spain, the eurozone’s third largest economy, leaving the euro may not be that country’s choice but instead may be the European Union’s. “They are too big to rescue, they have no political hang ups about rupturing their relations with the EU, they are already fed up with austerity, and there is a bigger Spanish-speaking world for them to grow into,” said Matthew Lynn of Strategy Economics.

Many investors are fearing that China could be slipping into a similar situation to that of 2008 and 2009, but top advisers said “massive fiscal stimulus” is not the answer at this time. Richard Boucher of the Organization for Economic Co-operation and Development said, “I don’t think we’re back in that kind of acute crisis phase. … It is not just a question of money. The Chinese authorities have a whole variety of tools to use to stabilize the right level of growth. … I think signs that Chinese growth is stabilizing at a steadier level, a more sustainable level, would be good for everybody.”

At 9 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,549.60, Down $0.90.
• Silver, $27.76, Down $0.12.
• Platinum, $1,413.30, Down $16.80.
• Palladium, $602.50, Down $3.50.

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