Daily Market Report 05/14/12

GOLD
Gold dropped $25 per ounce on the opening based on negative news from the Euro-zone and a very strong U.S. Dollar versus the Euro. After the initial price drop, Gold demand appeared and Gold rallied up $10 per ounce. Gold has been in a surprisingly narrow $12 trading range from $1554 to $1566 with active trading. At 11am PDT, Gold is down $17.30 per ounce, trading at $1,566 per ounce with excellent demand on volume of CME contracts traded.
 
On Saturday, the People’s Bank of China delivered a 50 basis point cut in banks’ reserve requirement ratio (RRR), effective from May 18, the third cut in six months and one that investors had called for after data on Friday showed the economy weakening, not recovering, from its slowest quarter of growth in three years.

Last week, it was the election in France that brought in a new socialist president, and this week it’s Germany, where the citizens gave Chancellor Angela Merke’s party a major defeat. In both countries the citizens are voting to reject harsh fiscal austerity policies as their countries are in the midst of a recession. The Euro-zone ministers are seeing major pressure to loosen monetary policies and provide more quantitative easing (print more money) to stimulate the economy, and ease up on the call for austerity.  

SILVER
Silver has followed Gold on the opening, downing to $28.15 per ounce before rallying back. At 11am PDT, Silver is trading at $28.52, down $0.38 per ounce on a normal volume of contracts.