Morning Market Update Jan 25

January 25th, 2013 by

Precious metals continued to consolidate this morning, as speculative longs pull out of the market after gold failed to breach the $1,700 mark after numerous attempts. Deutche Bank believes this will reinforce the somewhat narrow trading range we’ve seen lately, as the debt ceiling battle has been kicked down the road to May, and there are no large market catalysts expected in the near future to provide a direction one way or the other. With stock markets hitting multi-month highs regularly, little attention may be paid to precious metals until macro circumstances change.

A surging euro weakened the dollar overnight, easing downward pressure on gold. The euro hit an 11-month high on news that 278 European banks will be repaying  a much higher than expected € 137.2 billion ($183 billion) of Long-Term Refinance Operation (LTRO) funds to the European Central Bank.  January 30 is the first opportunity banks have for early repayment of these emergency low-interest liquidity loans the ECB handed out in 2011, much like the TARP funds in the U.S. The 278 banks clearing these loans off their books early represent more than half of the original 523 banks across the European Union that were part of the program.

More good news out of Europe also helped boost the euro. The German Ifo consumer confidence survey hit a 7-month high, which helped the German stock market hit the highest level since 2008.

by David Peterson