Gold is on the rise and is taking back its stance as a safe haven asset this morning  against the euro as nervous investors react to the Italian election.  “(The) Italian elections have been the first of the 2013 scheduled event risks to blow a hole in risk appetite. That the anti-establishment 5 Star movement was the party to win the single largest share of the vote proves a sharp reminder to Brussels that fiscal austerity can potentially be undone with a popular vote,” Dutch bank ING said in a note.  Federal Reserve Chairman Ben Bernanke will begin his two day congressional testimony today at 10 a.m. Eastern, in which many are expecting him to announce the Feds plans on future fiscal policy for the U.S. “Gold) seems to have rekindled its safe haven qualities a bit here,” Saxo Bank vice president Ole Hansen said. “But whether it will last for long probably depends on Bernanke this afternoon.” 

Platinum fell below the price of Gold for the first time in over a month  following concerns that the South African supply could be disrupted.  The metal was overextended as it hit a 17 month high this month.  “Anything to do with the South African mining industry” can affect prices, Marc Ground, a commodity strategist at Standard Bank Plc in Johannesburg, said today. “The market is a bit nervous. Because the Platinum market is so overstretched, it doesn’t take much for people to start selling.”

At 9:15 a.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,597.90, Up $9.80.
• Silver, $28.98, Down $0.08.

Last week, Gold hit a seven month low, which most economists expected would trigger an increase in physical purchasing of the yellow metal.  This morning has shown that the Gold price got to a level buyers could no longer ignore.  While there is still uncertainty in the marketplace, there is a growing sentiment that the price of Gold is moving upwards. " After the drop, hopefully the worst is over for Gold, although the support is still at $1,527. I believe (after) a break above $1,585, you might see a trend that it should test $1,600," managing director of GoldSilver Central Pte Ltd in Singapore Brian Lan said. While the lower prices have changed some outlooks for the coming year, the long term is still positive. " While we have downgraded our near-term views, Gold prices should accelerate in the second half on improving demand from India and China."

The discussion of the United States Federal Reserve stimulus policy was in full force last week. There are two sides to the Fed’s stimulus program and both arguments have merit. “The rate-sensitive sectors, most notably housing and autos, are kicking into a higher gear,” Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania, said. “This reflects the Fed’s aggressive monetary policy and resulting rock-bottom interest rates,” along with “working off the excesses of the boom and bubble.”  While there have been many positive indications from various reports, some economists are not sold on the progression.  “This makes a weak economy significantly weaker,” Martin Feldstein, an economics professor at Harvard University, stated regarding the policies of the Fed. Feldstein believes that the moves are a temporary fix that will not solve the long term issues facing the economy.

At 9:04 a.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,587.30, Up $13.00.
• Silver, $28.99, Up $0.47.

Gold prices ended this week in the same downward direction that it started. As the week started,  Gold remained at a 6-month low following last Friday's big loss from positive economic news. At this point the yellow metal requires some pessimistic data to rebound or a heavy demand in the asset. “Gold bugs would argue that last week’s pullback has opened up the opportunity to buy the metals at cheaper prices, and that, over the long term, prices should rise,” said GFT Markets technical analyst Fawad Razaqzada. While the lower Gold price made for buying opportunities, the demand could not influence the market enough to stop the market price from falling farther. On Wednesday the United States Federal Reserve released its notes from their January meetings and it made a large impact on the Gold price. The  Fed’s minutes indicated a potential halt of asset buying, which caused Gold to tumble to its lowest level since last July. Wednesday’s decline was the largest single-day drop in almost one year. QE has been instrumental in driving the Gold price up since its inception. The announcement that stimulus measures could come to an end caused Wednesday’s drastic price drop for the yellow metal as the appeal of Gold as an inflationary hedge has been temporarily cut short. “The economic data is telling us that the economy is definitely showing signs of improvement,” Vedant Mimani, a portfolio manager at Atyant Capital Management Ltd., said. To add to the lowering of Gold’s market price, “A lot of sellers came in after Gold broke below the psychological $1,600 mark, and concern about the end of stimulus is adding further pressure,” added Mimani. The Gold price is still fragile today, even after gaining some ground overnight when European stocks recovered from two-week lows. Gold fell to its seven month lows in part on worries that the Fed would slow its bond buying program. This program typically supports a strong Gold price.  Mitsui Precious Metals analyst David Jollie said,  “There's no doubt that the resolute sense of bullishness we've had in Gold over the last couple of years has weakened substantially. While there are still plenty of people who are bullish long-term, short-term sentiment is understandably more negative.” The global monetary policy of recent years has encouraged investors to seek refuge in Gold as a safe haven. We just have to wait and see how long it takes for investor confidence to return.

REASON FOR GOLDEN REBOUND

While the Gold and Silver prices reach 6 month lows, there are many reasons investors are still positive on the metal’s long term value. There is much discussion around the beginning of the automatic spending cuts that would come with the sequester in the U.S. “There is no real negotiation between Democrats and Republicans on a compromise and the beginning of the sequester on March 1, therefore seems to be inevitable,” strategists at R.J. O’Brien wrote. They continued, “Once the spending cuts hit, Republicans and Democrats will assess the extent of the stock market damage and any public outcry at defense industry layoffs, furloughs of government workers, and cuts in services for services such as meat inspections and flight controllers.” In the past, economic uncertainty has been a boon to the Gold price. One of the main players in the global Gold market is China. Last week, the Chinese markets were closed for their annual Lunar New Year holiday. Now that the market is back in session and Gold prices have dipped, there is good reason to believe physical buying will be picking up. Frederic Panizzutti, senior vice president at MKS Finance Geneva, explained, “What can and will probably make a dent in the recent downward direction is the opportunistical buying to take advantage of the sharp recent price decline. All factors that led Gold toward higher levels over the last three years are still intact and we would see no reason why the medium term trend would have changed.”  Ole Hansen of Saxo Bank added it may take some time to see the true affect of the physical buying of Gold.  “Actual confirmation will more be highlighted when we see monthly data on Hong Kong exports into China,” Hansen said. This week’s movements in the metals market have been based on speculation on the end of monetary easing in the U.S. However, there seems to be a difference in opinions between the reports and the members of the Federal Reserve. St. Louis Fed President James Bullard told CNBC Friday that the Federal Reserve’s “very aggressive” easy money policy is going to stay that way. He is even quoted as saying,  “This is a monetary policy that packs a punch.”  Bullard is a voting member of the Federal Open Market Committee (FOMC) and his quote raises more questions about the direction of the Fed and its effect on the metals market.

St. Louis Fed President James Bullard told CNBC Friday that the Federal Reserve’s “very aggressive” easy money policy is going to stay that way. He is even quoted as saying,  “This is a monetary policy that packs a punch.”  Bullard is a voting member of the Federal Open Market Committee (FOMC). The FOMC released minutes from its January meeting that said “many participants” expressed concerns about the risks of further asset purchases. Bullard, who is a self-confirmed optimist, says it is natural for the committee to be thinking about how to handle further asset purchases.

The Gold price is still fragile today, even after gaining some ground overnight when European stocks recovered from two-week lows. Gold fell to its seven month lows in part on worries that the Fed would slow its bond buying program. This program typically supports a strong Gold price.  Mitsui Precious Metals analyst David Jollie said,  “There's no doubt that the resolute sense of bullishness we've had in Gold over the last couple of years has weakened substantially. While there are still plenty of people who are bullish long-term, short-term sentiment is understandably more negative.” The global monetary policy of recent years has encouraged investors to seek refuge in Gold as a safe haven. We just have to wait and see how long it takes for investor confidence to return.

At 1 p.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,573.40, Down $6.70.
• Silver, $28.45, Down $0.32.

Gold and Silver prices gave up early gains this morning ahead of today’s panel discussion with Federal Reserve officials set for 10:15 a.m. It is expected that the discussion will focus on how the  dissent between politicians over fiscal policyis keeping the Fed from getting the economy on more solid footing. Minutes from the latest Fed meeting revealed some disagreement between Fed officials over the exit strategy for the latest round of quantitative easing (QE3). In the past, monetary stimulus measures have been bullish for Precious Metals prices.

Though the Silver price has fallen approximately 9 percent in February,  analysts are not turning their backs on the metal. One analyst explained that China’s Lunar New Year celebrations last week came at an inopportune time, leaving the Silver price open to the volatility of technical trading, but he expects a snapback that will be just as surprising as this month’s dip. The Silver Institute said in a report that China’s investment demand for Silver will grow robustly as access to the metal improves. Gijsbert Groenewegen of Silver Arrow Capital Management added, “The Chinese have to hedge themselves against the continuous debasement [of their U.S. dollar reserves and] the opposite of the U.S. dollar is Gold and Silver.” Paul Mladjenovic, author of Precious Metals Investing for Dummies, said, “[The] massive shorting in the futures market is warping supply and demand and at some point, the shorting will fail and Silver will have a spectacular rise.”

At 9:22 a.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,574.50, Down $5.60.
• Silver, $28.62, Down $0.15.