Gold and Silver Pause Following Bernanke Induced Jump

Posted On: Wednesday, February 8, 2012

Gold and silver finished with modest losses following yesterday's jump on the USD weakness in the wake of Ben Bernanke's testimony before the Senate Budget Committee. Yesterday, the USD reacted to sobering comments from the Fed Chairman who downplayed recent employment data, and indicated that the U.S. economy continues to operate at sub-optimal levels. This kind of talk merely reinforces the possibility that the door to more monetary easing is open. The EUR-USD breached the 1.32 level, which had been resistance, and is currently unchanged at 1.3258. As usual, what's bad for the USD is generally good for precious metals.

Today's main story was Greece and the general flight to safety as the USD moved broadly higher. Greek troubles were put into high relief following the release of dismal budget numbers from Greece, whose tax revenue continues to plummet despite measures to close the budget gap. Just released data show that "Revenues posted a 7% decline compared with January 2011, while the target that had been set in the budget provided for an 8.9$ annual increase." The implosion of Greece as an economy continues before the world's eyes. These latest data points certainly suggest that Greece will be hard pressed to stop the rot. As has been the case for the last several days, financial markets continue to wait on the "imminent" accord that will release the second 130 billion EUR bailout. Without these funds, Greece will most likely default on March 20th. The implications of a default are unclear, but many commentators suggest the unintended consequences from such an event would be Lehman-Like.

For anyone interested in the current minutiae related to the Greek negotiations, Bloomberg has the following piece - Greece Premier Seeks Rescue Consensus Amid Quarrels.

Spot gold prices were off $10.23 at $1,736.42 per troy ounce. Spot silver prices were down $0.17 at $34.05 per troy ounce. The gold-silver ratio is at 51.03.

Commodities outside precious metals were mostly higher. WTI crude futures were up $0.58 at $98.99 per barrel, again knocking on the $100 level. Copper futures were up $0.03 at $3.906, closing in on the $4 per pound level.

Treasuries were essentially unchanged with the yield on the 10-year Treasury at 1.98%. The USD was broadly higher.

There are no significant economic releases scheduled for today.

Other News

Dow Jones is reporting that the ECB will make its final decision on whether to take part in reducing Greece's debt burden. The ECB represents the largest public creditor for Greece and its participation in a debt writedown is largely seen as neccessary if Greece's debt burden is to become manageable.

San Francisco Fed President John Williams said that more bond buying, also known as QE3, should be provided if the economic recovery falters. This jives well with Ben Bernanke's recent congressional testimony.

S&P downgraded CME Group (CME) to AA- from AA, and left the outlook at negative. The fallout from the October 31st bankruptcy of MF Global continues. Shares of CME are not showing any negative reaction, up $6.97 at $283.02 per share.

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