Gold & Silver Daily Market Recap: September 6th, 2012

Spot gold finally broke higher to clear $1700 in European trade over night on speculation of European Central Bank president Mario Draghi's speech.

The much anticipated European Central Bank press conference with President Mario Draghi has dominated the headlines as well as the price action, spot gold jumped to $1716 prior to the ECB's president's speech as he took the microphone the metal sold off to just below $1700. Some highlights of the Draghi's speech.....

"“Under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area.”"

“Governments must stand ready to activate the EFSF/ESM in the bond market when exceptional financial-market circumstances and risks to financial stability exist — with strict and effective conditionality,” Draghi said. The ECB reserves the right to terminate bond purchases if governments don’t fulfil their part of the bargain, he added

The euro dollar initially sold off to 1.2567 before bouncing back and remains choppy. The yield on Spain’s two-year government bond dropped to 2.99%, and yield on Italy’s two-year bond to 2.40%.

We now turn our attention to the U.S, the release of the ADP Employment Change, which is often viewed as a precursor to the Non-Farm Payrolls being released in the morning, rose 201k. The Initial Jobless Claims were also better at 365k while 370k was projected.  These positive numbers raise expectations a positive result for tomorrow’s Nonfarm payrolls. The NFP will be just as closely watched as today’s ECB meeting due to its significance as to whether the Federal Reserve would implement QE3 next week.  If job numbers are good, it potentially delays any implementation, whereas if the numbers are dismal, the Fed may be apt to immediately.

Spot silver has followed gold's lead and rallied to $33.01, but couldn't hold onto its gains after Draghi's speech and positive U.S data. The gold silver ratio targeted our 51.50 level and held so far. Expect further weakness if it can break the level. There has been talk of a large long position in the gold silver ratio; which means long gold, short silver; and that this must be unwound...it will be interesting to see what happens in the coming weeks.

September 6th Closing Prices