Apmex Gold & Silver Market Report -- 8/16/2011

The following is a commentary from APMEX

APMEX Morning Gold & Silver Market Report -- 8/16/2011
(Peter LaTona), APMEX - Commentaries

WEAK ECONOMIC DATA OUT OF GERMANY SENDS GOLD PRICES SOARING

In overnight trading activity, gold and silver prices have risen sharply on reports of slow Gross Domestic Product (GDP) growth out of Germany. Slower than expected growth out of Germany is viewed as another indicator of a slowing global economy. Investor appetite for risk has abated, as equity markets are down worldwide and U.S. stock market futures are off by triple digits.

Germany's GDP numbers for April -- June was expected to see a growth of 0.5%, but the numbers came in at 0.1%. This data showed that Germany had grown even slower than Spain, which came in at 0.2%. "The global slowdown is gradually reaching Germany," said Andreas Scheuerle, economist at Dekabank.

French President Sarkozy and German Chancellor Merkel began meetings at 7AM (CT) today. These are high-pressured discussions that aim to shore up investor confidence in the euro zone. These two leaders need to demonstrate to the financial markets they are in agreement on to fix European debt problems. At stake is the potential unraveling of the entire European Union.

According to a new report from HSBC, the recent volatility we have seen in the equity markets will likely ramp up in September, sending markets back to "Lehman levels" of stress. Stacy Williams, HSBC Director of Quantitative FX Strategy commented, "For several months the market has been significantly overestimating the strength of US economic activity. Whilst it may not have felt like a period of runaway euphoria, the level of pessimism was clearly not high enough."

At 8:00 am (CT) the APMEX precious metals spot prices were:

Gold - $1,783.70 -- Up $23.70.
Silver - $39.87 -- Up $0.46.
Platinum - $1,819.70 -- Up $22.50.
Palladium - $749.90 -- Up $1.50.

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Mid-Day Gold & Silver Market Report -- 8/16/2011
(Ryan Schwimmer), APMEX - Commentaries

INDUSTRIAL PRODUCTION UP, SOOTHING FEARS OF RECESSION ... FOR NOW

Since the stock market opened this morning, stocks have declined amid the news of Germany's sluggish Gross Domestic Product growth. Gold and silver have risen since the morning, adding to gains as investors look for a safe haven away from the volatile market. A Federal Reserve report showed that there was a 0.9% gain in industrial production in July, which supported the prices of platinum and palladium.

The report said that industrial production was up thanks to the auto industry, but the news wasn't enough to outweigh the negative effects on the market of Germany's GDP growth (or, more specifically, the connotations it has regarding a slowing global economy). It has seemed to soothe fears of another recession, for the time being. Ryan Sweet of Moody's Analytics said, "I don't think we are headed for a second recession. When you take the industrial production report together with July retail sales, it shows consumer spending started this quarter off to a decent start."

The meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel this morning brought about an agreement that the size of the European Financial Stability Fund did not need to be increased. The leaders of the two largest economies within the eurozone also agreed that a tax on financial transactions was necessary. They also discussed the need for stricter enforcement of economic policy within the eurozone.

At 12:00 pm (CT) the APMEX precious metals spot prices were:

Gold - $1,786.10 -- Up $26.10.
Silver - $40.04 -- Up $0.63.
Platinum - $1,818.00 - $20.80.
Palladium - $758.90 -- Up $10.60.

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Closing Gold & Silver Market Report -- 8/16/2011
(Robert Davis), APMEX - Commentaries

STOCKS SNAP WINNING STREAK, INVESTORS GET GOLD FEVER

Gold is up since the mid-day commentary, and stock closed for a loss of around 1%. The market seems jittery after hearing the announcement by leaders Sarkozy and Merkel regarding plans to deal with the EU debt crisis.

Many traders were hoping for a "Eurobond" program, a system where the European Central Bank, instead of individual countries, would sell bonds to borrow money, and those bonds would be guaranteed by every country in the Union. While this could potentially prevent a catastrophic default by one the EU's larger nations, the more stable countries could be left on the hook for the riskier countries' mistakes. Germany and France have both expressed apprehension for the plan. Frank McGhee, Head Precious Metals Trader at Integrated Brokerage Services LLC, said, "At the end of the day, it (Sarkozy-Merkel news) is going to put worries back into the market about the euro and euro zone that may have been quieting down. It's going to add additional volatility into the gold market."

Despite the downgrade by Standard & Poor's, interest rates on American bonds reached a new low, a sign that bond traders aren't worried about the possibility of default. Although the downgrade set off a series of highly volatile stock trading sessions that resulted in trillions of dollars in losses in stocks, Edward Marrinan, the Head of Macro Credit Strategy at RBS Securities in Stamford, Connecticut, said, "The market is saying S&P's rating decision is wrong. The Treasury bond is still seen as the ultimate risk-free security." Interestingly enough, S&P recently upgraded the rating for communist China.

At 4:15 pm (CT) the APMEX precious metals spot prices were:

Gold - $1,791.60 -- Up $31.60.
Silver - $40.03 -- Up $0.61.
Platinum - $1,820.10 - $22.90.
Palladium - $760.70 -- Up $12.30.