Mid-Day Gold & Silver Market Report, 8/10/2012

Brandi Brundidge

8/10/2012 12:09:00 PM

U.S. DROUGHT PUSHING GOLD HIGHER; BANK RECOVERY PLANS REQUIRED  

Gold is up in midday trading, sparked by inflation concerns and the possibility of higher food prices. The United States Agriculture Department released its corn crop forecast today, slashing its production estimate in light of the worst drought the United States has seen in 56 years. “We have seen Gold running higher this afternoon. I think this is a spillover effect from the USDA crop report out today, which is confirming fears of a reduction in production,” said Ole Hansen, a senior commodity strategist at Saxo Bank. “This is indicating that we could see continued high prices for some of these key crops in the months ahead. And especially in some emerging economies, this could lead to higher inflation towards the end of the year.”

Five of the nation’s largest banks have been directed to develop recovery plans in the event of collapse that “does not include” government help. This program is separate and apart from the “living wills” banks were to create as part of the 2010 Dodd-Frank financial reform law. Both the Federal Reserve and the Office of the Comptroller of the Currency (OOC) issued this (until now mostly secret) directive in May 2010. “Recovery plans required of the largest banks are helpful in ensuring banks and regulators are prepared to manage periods of severe financial distress or instability affecting the banking sector,” said Mike Brosnan, senior deputy comptroller for large banks at the OCC.

New data from China showed weaker than expected growth in Chinese exports and sent American stocks trading lower. It appears that additional action may be needed, and soon, to stabilize the Chinese economy. “The data was not bad; it was horrendous,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services. “China's export problem is an external problem, and it has to do with Europe,” Mendelsohn said. “After these numbers, investors may want to see (stimulus) activity fairly quickly, especially from the ECB.”

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

• Gold, $1,622.70, Up $4.00.
• Silver, $28.19, Down $0.02.
• Platinum, $1,401.50, Down $12.30.
• Palladium, $584.10, Down $4.10.

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