Mid-Day Gold & Silver Market Report, 8/7/2012

Brandi Brundidge

8/7/2012 12:06:00 PM

GOLD REFLECTS EURO OPTIMISM; RECESSION FEARS FADING?  

While slightly off its morning high, the Gold price is reflecting increased optimism in the euro. Growing belief the European Central Bank (ECB) will take action to help Spain and Italy helped stock markets and the strength of the euro relative to the American dollar. “In the immediate term, it’s all about the euro, which is currently very close to a one month high,” Sharps Pixley Chief Executive Ross Norman said. “There’s a degree of optimism in the markets at the moment on possible stimulus. We had a bit of an updraft from the euro, while at the back of our minds we have concerns over demand destruction in key centers like India. But broadly speaking, the market seems to be in the summer doldrums, lacking conviction on the moves higher.”

The benefit of expanded monetary policy far outweighs any inflationary risk, said Eric Rosengren, Boston Federal Reserve president. “There are a number of areas where quantitative easing can help,” Rosengren said. “One, it does push up asset prices. A second area is the housing market,” he said. Rosengren points to the strengthening housing market as a result of the Fed’s efforts to keep long term rates down, and that the gains seen in stock markets after quantitative easing announcements have led to increased consumption.

Better than estimated corporate earnings, in conjunction with the belief the ECB will take action, helped boost American stocks again. “The fear of things collapsing is going away,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, N.Y. “The recession, which everyone was concerned about a month ago, is not going to happen. There’s a perception that the ECB is willing to buy bonds if needed.”

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

• Gold, $1,612.10, Down $2.10.
• Silver, $28.20, Up $0.23.
• Platinum, $1,409.40, Up $6.50.
• Palladium, $589.90, Up $8.90.

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