{"id":25465,"date":"2011-11-21T09:21:54","date_gmt":"2011-11-21T14:21:54","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=25465"},"modified":"2011-11-21T09:21:54","modified_gmt":"2011-11-21T14:21:54","slug":"gold-down-along-with-stocks-failure-of-congressional-committee-could-be-negative-for-us-credit-rating","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/11\/21\/gold-down-along-with-stocks-failure-of-congressional-committee-could-be-negative-for-us-credit-rating\/","title":{"rendered":"Gold Down along with Stocks, Failure of Congressional Committee “Could Be Negative for US Credit Rating”"},"content":{"rendered":"

London Gold Market Report<\/strong>
\nfrom Ben Traynor<\/strong>
\nBullionVault<\/strong><\/a>
\nMonday 21 November, 08:30 EST<\/strong><\/p>\n

SPOT MARKET\u00a0gold prices\u00a0continued falling Monday morning in London, touching $1701 per ounce \u2013 1.3% down on Friday’s close \u2013 as the US Dollar rallied, despite reports of failure by the congressional ‘super committee’ to agree on how to tackle the US deficit.<\/p>\n

“[Gold] Prices didn’t correct enough [last week],” says one dealer in Singapore, adding that\u00a0gold prices\u00a0“need to go below $1700 and stay, otherwise people won’t buy”.<\/p>\n

Commerzbank however say they expect to see gold trading at $1800 and ounce by the end of the year, while Deutsche Bank say in their weekly commodities report they expect periods of risk aversion to remain through 2012 and their strongest conviction trade remains long precious metals and specifically gold.<\/p>\n

“In an environment where real interest rates are negative and the US equity risk premium is high we expect this will sustain strong private and public sector demand for gold. However, this week has shown that gold has become more vulnerable to environments\u00a0where the US dollar is strengthening,” DB say, adding that gold would need to rise beyond $2,170\/oz to enter bubble-territory.<\/p>\n

Silver prices\u00a0also fell, hitting $31.00 \u2013 4.3% down on last week’s close.<\/p>\n

Stock and commodity markets sold off too \u2013 with Germany’s DAX down 2.5% by lunchtime.<\/p>\n

On the currency markets, the US Dollar gained against the Euro Sterling and Yen as investors piled into US Treasury bonds \u2013 pushing the yield on 10-Year Treasuries below 2%.<\/p>\n

Over in Washington, the bipartisan congressional \u00a0‘super committee’ \u2013 tasked with agreeing measures to reduce the US deficit by $1.2 trillion over the next ten years \u2013 was reported Monday morning to be close to announcing its failure.<\/p>\n

“The likely outcome is no agreement will be reached,” one anonymous Democratic aide told CNN on Sunday.<\/p>\n

“I’ll tell you one of the problems,” said Democrat senator Patty Murray \u2013 who co-chairs the committee.<\/p>\n

“A pledge that too many Republicans took to a Republican wealthy lobbyist by the name of Grover Norquist, whose name has come up in meetings time and time again.”<\/p>\n

Norquist is president of lobby group Americans for Tax Reform. More than 270 Republican lawmakers are said to have signed his pledge promising not to vote for tax increases.<\/p>\n

“In Washington, there are folks who won’t cut a Dollar unless we raise taxes,” countered Republican senator John Kyl.<\/p>\n

“If you want to get serious about the deficit, our country has to grow economically…you can’t grow, if you raise taxes in the middle of a recession.”<\/p>\n

The super committee was set up in the wake of the summer’s debt ceiling debate \u2013 which saw the US come within hours of hitting its federal borrowing limit before it was raised. Later the same week, on August 5, ratings agency Standard & Poor’s lowered its sovereign credit rating for the US from AAA to AA+.<\/p>\n

“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened,” said an S&P statement explaining the August downgrade.<\/p>\n

Moody’s and Fitch \u2013 the two other major ratings agencies \u2013 have both maintained their triple-A US ratings. However, “anything that dilutes the deficit reduction that we’re now expecting would certainly be a negative in our thinking about the rating,” says Moody’s vice president Steven Hess.<\/p>\n

“As is the case with policymakers in Europe,” argues Michael Gapen, senior US economist at Barclays Capital, “US politicians need to be doing more than investors expect, not less.”<\/p>\n

A failure of the super committee to agree a deficit-cutting plan risks triggering automatic spending cuts of $1.2 trillion. These cuts would start in 2013 and would include spending on defense, education, energy and housing.<\/p>\n

“If the automatic cuts are activated then the US will be going through the same austerity that has not proved particularly successful so far in Europe with regards to growth,” says Jim Reid, head of global fundamental credit strategy at Deutsche Bank in London.<\/p>\n

Here in Europe, Spain’s center-right Popular Party won Sunday’s general election, defeating the incumbent Socialist Party.<\/p>\n

“Hard times lie ahead,” Spain’s new prime minister Mariano Rajoy said after his victory.
\n“We are going to govern in the most delicate situation Spain has faced in 30 years.”<\/p>\n

Yields on Spanish 10-Year government bonds climbed to over 6.5% Monday morning.<\/p>\n

Elsewhere in Europe, Moody’s has indicated that it may consider changing its outlook for France’s credit rating from ‘stable’ to ‘negative’.<\/p>\n

“Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,” Senior Credit Officer Alexander Kockerbeck said in Moody’s Weekly Credit Outlook dated November 21.<\/p>\n

“As we noted in recent publications, the deterioration in debt metrics and the potential for further liabilities to emerge are exerting pressure on France’s creditworthiness and the stable outlook (though not at this stage the level) of the government’s Aaa debt rating,” the Moody’s note read.<\/p>\n

Over in New York, the number of bullish minus bearish contracts held by noncommercial\u00a0gold futures\u00a0and options traders on the Comex exchange \u2013 the so-called speculative net long \u2013 rose for the fourth week running in the week ended November 15 \u2013 though at a slower pace than the previous week \u2013 according to data published Friday by the Commodity Futures Trading Commission.<\/p>\n

The spec long rose 1.4%% to the equivalent of 625.1 tonnes of\u00a0gold bullion.<\/p>\n

Over, the same period, the volume of gold held to back shares in the SPDR Gold Trust (ticker GLD) \u2013 the world’s largest\u00a0gold ETF\u00a0\u2013grew by 0.3%. However, by Friday last week, the GLD had seen its gold volume grow by nearly 2% from where it stood on Tuesday \u2013 during which time\u00a0gold prices\u00a0fell by more than 3%.<\/p>\n

Ben Traynor<\/strong>
\nBullionVault<\/strong><\/p>\n

Gold value calculator \u00a0\u00a0| \u00a0\u00a0Buy gold online at live prices<\/strong><\/a><\/p>\n

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.<\/p>\n

(c) BullionVault 2011<\/p>\n

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events \u2013 and must be verified elsewhere \u2013 should you choose to act on it.<\/p>\n","protected":false},"excerpt":{"rendered":"

SPOT MARKET gold prices continued falling Monday morning in London, touching $1701 per ounce \u2013 1.3% down on Friday’s close \u2013 as the US Dollar rallied, despite reports of failure by the congressional ‘super committee’ to agree on how to tackle the US deficit.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-25465","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/25465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=25465"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/25465\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=25465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=25465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=25465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}