Mid-Day Gold & Silver Market Report – 1/3/12

Brandi Brundidge

1/3/2012 12:01:00 PM

SAME ISSUES LIKELY TO AFFECT GOLD PRICE IN 2012   

Precious metals prices continued to climb through this morning. Gold’s correlation to the euro is at its most positive in almost two years. Credit Suisse analyst Tom Kendell commented on the effect of global events on the Gold price, saying, “Other than events in the eurozone, I think it is going to be quite key to see what happens with the situation in Iran over the next few days. If the situation there deteriorates and there are perceived to be significant risks to oil supply from Iran, then you would expect to see a significant move in crude prices and for that to spill into Gold. A sharp rise in energy prices could trigger some concern about future inflation among investors, thereby benefiting Gold.”

There were many factors driving uncertainty in the market in 2011. With a new year to tackle new problems, the eurozone crisis remains intact with no solution in sight. This ongoing crisis has driven borrowing costs to unsustainable levels and created concern for a banking crisis in Europe. In an outlook note on 2012, David Simmonds with the Royal Bank of Scotland wrote, “The eurozone crisis is life-threatening because there is too much debt, too little growth and huge intra-zone trade imbalances -- belated resurrection of fiscal rules is no panacea. We are in a multiyear de-leveraging world with multiyear low-growth consequences, so mistrust most the quick-fix, free-liquidity addicts who seize on each emergency monetary policy response as a cure-all.”

A key U.S. manufacturing index was released today for December, showing evidence of growth. The demand for automobiles and an increase in holiday sales is paving the pathway for a U.S. economic recovery. “Global economic activity is showing signs of life,” said Tom Porcelli with RBC Capital Markets Corp. “Manufacturing in the early part of the year will keep expanding. It’s good to know that purchasing managers are feeling a bit better about the economic backdrop.”

At noon (CST), the APMEX precious metals spot prices were:

• Gold - $1,601.30 – Up $33.50.
• Silver - $29.44 – Up $1.45.
• Platinum - $1,431.00 – Up $28.10.
• Palladium - $666.60– Up $9.50.