Apmex Gold & Silver Market Report -- 7/27/2011

The following is a commentary from APMEX

APMEX Morning Gold & Silver Market Report -- 7/27/2011
(Peter LaTona), APMEX - Commentaries

GOLD RISES AS DEBT CEILING STUMBLES

Gold prices surged to another new high overnight, as investors seeking to protect their wealth against the possibility of a U.S. debt default sought the safe haven of gold. Silver prices have continued to rise as well and are now at their highest prices since May. Although the consensus opinion is that the debt ceiling will be raised, there is little optimism that a solid plan to reduce long term debt will be passed.

News this morning that President Obama is working with Congress to come up with a "Plan B" is a further indication that the current debt discussions are going nowhere. It is becoming more and more likely that even if a plan is passed to raise the debt ceiling, the U.S. will not avoid a credit rating downgrade. House Speaker John Boehner was forced to postpone a vote of his plan when it became apparent he did not have enough votes. Stephen Green, head of research for Greater China for Standard Chartered Bank commented, "Chinese clients take a more pessimistic view on America's longer-term fiscal health, many of them look at the politics in the U.S. and see that it's so dysfunctional that they're losing hope that the U.S. can actually get its fiscal house in order."

Let's shift our attention to the debt deal in Europe last week. There are contrasting stories coming out this morning that European politicians are telling different stories to their constituents about the nature of last week's agreement to save Greece. This has only underscored the fragility of last week's deal and put additional uncertainty into the already fragile financial markets.

Back to the U.S., the durable goods order log for June just came out with a surprise to the negative as orders dropped 2.1%. Durable goods are those goods expected to last three years or more and they are often seen as a leading indicator of the manufacturing sector.

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

Gold -- $1624.70 - Up $6.90.
Silver -- $41.15 - Up $0.40.
Platinum -- $1815.60 -- Up $8.40.
Palladium - $844.60 -- Up $6.50.

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Mid-Day Gold & Silver Market Report 727/2011
(Ryan Schwimmer), APMEX - Commentaries

HURDLES FOR DEFICIT-REDUCTION PLANS; FED WON'T STEP IN

Hurdles are popping up all over the place in Washington as both Democrats and Republicans are working on proposals to cut the national deficit. House Speaker John Boehner saw his proposal delayed due to strong opposition from both parties, while Senate Majority Leader Harry Reid's plan is being reworked due to not cutting as much as advertised (much like Boehner's plan as well). One analyst believes that losing the top-notch AAA credit rating is an inevitability for the U.S., even if a deal is reached. Standard & Poor's has outlined the steps needed to maintain the AAA rating, and the criteria seems unlikely to be met at this point.

Some speculation was that the Federal Reserve could step in at the 11th hour to keep the U.S. from defaulting. According to testimony from Chairman Ben Bernanke, this is untrue. He says that not only are there considerable legal restrictions, but also that the independent organization that is the Fed would not want to to step into what has become a huge political issue.

Gold has traded in a fairly small window up and down today, with the debt deal uncertainty supporting prices and, most likely, profit-taking or loss covering in other markets pushing the other way. Frank McGhee of Integrated Brokerage Services LLC says, "A [credit-rating] downgrade increases the cost of carrying this debt. The level of U.S. government borrowing has caused the erosion of the dollar and adds more fuel to the metal's rally."

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

Gold -- $1,614.40 -- Down $3.30.
Silver -- $40.59 -- Down $0.17.
Platinum -- $1,808.60 -- Up $1.40.
Palladium - $834.50 -- Down $3.60.

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