GOLD
As the pressure builds on Congress to provide Debt Ceiling legislation that would pass both houses and be signed into law by the President, we are seeing higher volume and volatility in the precious metal markets. Gold has traded in a $19 range today, down $.40 cents at 11am PDT trading at $1,615.90 per ounce. Keeping gold trading over the supportive $1,600 level is very bullish, because when we hopefully see a resolution to the debt ceiling crisis, any gold correction will be supported at $1,600.
Gold Mining Stock and funds dropped another 3-5%, with gold only down 90 cents. If you haven’t already replaced your gold mining shares with physical gold, do it now! Otherwise, if the stock market continues to get hit, you’ll be hurting big time.
SILVER
Silver sold off this morning trading as low as $39.24 per ounce with a price range of over $1.25. At 11am PDT Silver is only down $0.65 at $39.92 per ounce. Silver continues to take direction from Gold and the ongoing problems in Washington over the Debt Ceiling increase. Demand has been light in Asia, but this is normal at this time of year. It would be bullish to see Silver rally back above the $40 by the close.
2nd Update on Debt Ceiling Crisis, How is it unfolding..
Wall Street bankers are complaining that the Federal Reserve and the U.S. Treasury are refusing to discuss plans if US securities are downgraded or the government defaults. Bankers are saying they are not getting a response to efforts to discuss the market impact of a failure to reach a deal in Washington, or of credit ratings agencies lowering the US triple A rating. They want to address contingency planning for a run on money market funds that hold Treasury bonds, the impact on capital and liquidity ratios if there are large inflows or outflows of deposits, and the potential effect on short-term financing from any problems in the repurchase, or “repo”, market.
The latest evidence on the economy suggests that the tense standoff between Congress and the Obama administration over raising the debt ceiling is coming at a terrible time — not in a period of robust or even passable growth, but at a time the U.S. economy is barely eking out any expansion at all. Somebody is going to pay the price for this politically created crisis. It may be the freshman Tea Party Republicans, or all incumbents, but the voters are angry and this will be a campaign issue next year.
Other Important news that effects precious metal prices:
Pending home sales rose 2.4% in June, driven by gains in the West and the South, according to an index released by the National Association of Realtors on Thursday.
Applications for unemployment benefits dropped last week to the lowest level since April, a sign the weakness in the labor market is fading. Jobless claims fell by 24,000 to 398,000 in the week ended July 23, Labor Department figures showed today in Washington.
There is a threat of lower gold supply out of South Africa, where a strike by unionized workers in the industry taking place today has boosted gold. More than 250,000 miners set down their tools after wage talks failed. South Africa is the world’s fourth-largest gold producer, accounting for some eight percent of total output. “There will be a total shutdown of the entire gold mining industry for it is inconceivable how the industry could want to give workers an increment of seven percent when the gold price is at record highs,” the National Union of Mineworkers said. The strike will cost the industry roughly 16,000 ounces of gold per day.
