The  Gold price took a dive today  after Federal Reserve Chairman Benjamin Bernanke gave no indication of further monetary easing by the Fed. Bernanke testified before the Joint Economic Committee today. He pressed Congress to pass legislation to avoid the  “fiscal cliff”  coming at the end of the year, when automatic spending cuts will kick in and tax cuts will expire. Tom Essaye, editor of the 7:00’s Report, said, “That being said, there’s strong support (for Gold) at the $1,600 level, as generally the market feels that QE3 or more accommodation is just a matter of when and not if.”

Ratings agency Fitch downgraded Spanish debt  to BBB from A today on concerns that the country will need a bailout package to avoid economic disaster. Furthermore, Fitch’s outlook is negative, which means that more downgrades are likely. German Chancellor Angela Merkel reacted by reiterating Germany’s commitment to helping its weaker eurozone partners. “It is important to stress again that we have created the instruments for support in the eurozone and that Germany is ready to use these instruments whenever it may prove necessary,” she said.

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,589.70, Down $44.00.
• Silver, $28.64, Down $0.94.

News from China was driving markets this morning, as the central bank in the country  cut interest rates by 25 basis points. Jordan Lambert of Spreadex Ltd. said “The unscheduled rate announcement by the Chinese central bank has been long awaited and has satisfied the growing expectations of a rate cut by a major economy. … It is also worth being mindful that sometimes such interest rate moves are coordinated with other central banks. Therefore, there could be further surprises to the upside.”

Also in focus today will be Federal Reserve Chairman Ben Bernanke’s testimony to the Joint Economic Committee. Bernanke always seems to move the markets when he speaks, and today may be no different. Another top Fed official, Janet Yellen,  is not closing the door on a third round of quantitative easing. “I am convinced that scope remains for the (Federal Open Market Committee) to provide further policy accommodation,” Yellen said. She said recent jobs numbers have been “pretty disappointing,” and that, among other topics, could be reason for further intervention.

This week’s jobless claims report showed a drop of 12,000 new claims, which is better than expected. However, numbers from two weeks ago were revised upward by 6,000, and continuing claims rose by 34,000. Precious Metals prices and stock prices seemed to take this news in stride, as they continued to be influenced more by the Chinese rate cut.

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

• Gold, $1,623.20, Down $10.50.
• Silver, $29.54, Down $0.04.

Precious Metals prices have seen a relatively volatile day but remained in positive territory throughout the day. Many traders are speculating that poor jobs data, renewed optimism that stimulus will be re-introduced, and growing safe haven sentiment are boosting Precious Metals. Chief market strategist Jeff Kleintop said, “While stocks may be nearing an attractive entry point,  Precious Metals may be rising on investors’ shopping lists  as they start to look at deploying cash positions.” Silver rallied as well today, rising 4 percent for the day, the largest rise since February.

There is a lot of cautious optimism bubbling ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress tomorrow. The economic stimulus is not limited to domestic markets, but there is a belief that world central banks will start introducing their own national stimulus, sending global and domestic markets climbing. Global strategist Dan Greenhaus said, “There’s just been, for the last 48, 72 hours, a growing feeling that a 10 percent decline in the stock market is as deep a decline as you would get with Ben Bernanke lurking tomorrow.” He also added, “The fate of the market in the next couple of days is in Ben Bernanke’s hands, and its over his interpretation of the state of the economy.”

There is a growing sense that the European Central Bank will step in, but not to the level some economists are expecting. The ECB has stepped in with three month loans, but has not announced plans for additional three year loans. Rate cuts and additional liquidity support for banks are being asked for, as well. However, without the three year loans, the pressure is on sovereign governments to help themselves. ECB President Mario Draghi said, “I don’t think it would be right for the ECB to fill other institutions’ lack of action.” However some economists are alluding to a lengthier resolution, including economist Tobias Blattner, who said, “Draghi left the door wide open for a rate cut. … But policy makers wanted to keep their powder dry until after the Greek elections and the independent assessment of the Spanish banking sector.”

At 5:02 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,619.50, Up $3.10.
• Silver, $29.46, Up $0.96.

Precious Metals were holding on to moderate gains this morning, with the Gold price up about 1 percent and Silver up 3 percent. The European Central Bank (ECB) seems to be the major focus today, announcing this morning it would  keep its key lending rate unchanged.  American stock futures gave up some gains after the news, with investors looking for action from the ECB, though the euro strengthened over the American dollar. If solutions are found in the eurozone, further increases to the euro are likely, and if recent trends are an indicator, Precious Metals could benefit from that.

Tax proceeds in Greece are drying up, and the next step may be to  stop paying salaries and pensions of government employees. Even worse, imports of food, fuel, and medicine could be next to go. Tax evaders seem to be hiding, and Nikos Maitos of Greece’s financial crimes investigation unit said, “One repercussion of the crisis is that people are harder to find. And when you do find them, they don’t have money.” It may be difficult to imagine, but with things as bad as they are in Greece, it just keeps sounding worse for Spain, which boasts an economy nearly five times the size of Greece’s.

Germany seems to be giving Spain options it has not offered to other countries in need.  A deal is reportedly in the works for Spain to be able to recapitalize its banks  with aid from other eurozone members without being forced to impose economic reforms. It is essentially a loophole in that if Spain put in a formal aid request, the money could come without agreeing to strict austerity measures like those seen in Greece, Ireland, and Portugal.

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

• Gold, $1,634.40, Up $17.90.
• Silver, $29.43, Up $0.93.

Spain may be  required to accept a bailout soon  as that country’s treasury minister told Spanish radio listeners today that it’s “technically impossible” for Spain to bail out itself. Spanish banks are suffering from an overload of debt from the country’s bursting housing bubble that was fueled by cheap interest rates after Spain joined the eurozone. Bond yields on Spanish sovereign debt have tipped near the 7 percent mark that signals markets are anticipating a default, and have been trading at 5.48 percent premium to safe haven German bonds,  indicating reluctance to loan the government more and more money. Spain will attempt to issue $2 billion more euros in bond debt on Thursday, which will be a test of market sentiment.

Famed hedge fund manager George Soros estimates  Europe has three months to address the crisis. “The heavily indebted countries need relief on their financing costs. There are various ways to provide it but they all need the active support of the Bundesbank and the German government,” Soros said. “Nothing can be done without German support.” While he does not expect a full-blown collapse of the euro, Soros expects Germany’s economy to weaken and the resolve of German citizens to soften to the point that they will be increasingly resistant to assist with further bailouts. Soros, a noted Gold bug, rose to fame in the early 1990s by betting against the British pound, earning him the title “The Man Who Broke the Bank of England.”

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,617.60, Up $4.20.
• Silver, $28.57, Up $0.48.

Precious metals are rising again, largely on safe haven appeal, as concerns in Spain and Greece have not abated and  gold imports in China are climbing. HSBC wrote, “Gold prices may be supported by China's growing appetite for bullion, as imports from Hong Kong climbed to record highs. Furthermore, imports of gold coins, which are reported in a separate category in the trade data, increased significantly to 1,876 kg in April from 5 kg in March. The ability of China to sustain gold imports is impressive, considering that the economy is showing signs that growth is cooling and income growth is moderating.” Meanwhile Commerzbank feels that gold has “regained its safe haven status.”

At the G-7 conference, Spain’s Treasury Minister Cristobal Montoro basically sounded the alarm abouthow bad the banking situation is in Spain at this time. As the debt gets worse the access to credit to help bail themselves out is becoming more and more detrimental. He even called for European assistance, a departure from what other government officials had wanted, which was to raise the funds itself. Germany is pushing Spain to accept the bailout. In an interview Montoro said, “The risk premium says Spain doesn't have the market door open. The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.”

Central banks remain squarely in the crosshairs as the main target to appease economic concerns. Federal Reserve Chairman  Ben Bernanke is expected to testify before a congressional panel Thursdayabout the current economic outlook and monetary policy. Chief strategist Michael Derks said, “Policy makers would appreciate that both growth and inflation remain too low, and that financial conditions have the potential to be eased still further. As such, Bernanke and his fellow board members are probably considering a further round of [quantitative easing], coupled with an extension of their forward guidance on monetary policy.”

At 8:02 a.m. (EDT) – the APMEX Precious Metals spot prices were:

• Gold - $1,617.70 – Up $4.30.
• Silver - $28.41 – Up $0.32.

Gold prices slipped below $1,550 in early morning trading before closing Friday around $1,625. The dismal American jobs report sank stocks around the globe, while Gold again became a safe haven for nervous investors.  Gold was up 4 percent  on the day. It began the day in negative territory.

Is it possible that the weak job growth in the United States will  threaten the world economy? When you add this to what is going on in Europe and the Chinese factory production going into neutral, there is cause for concern. “It certainly suggests that perhaps the softness in Europe is either influencing the U.S., or that the U.S. recovery may not be strong enough to overcome the softness in Europe,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

Gold and Silver prices had been sinking in the past month because the dollar’s value had risen in relation to the European euro. Friday’s jobs report could verify what many analysts had already indicated. The dollar is simply the least wilted rose in the vase. U.S.A. Treasury bonds are paying all time lows, and the spread between five and 10 year notes is at all time highs. There are many who feel that Gold will become the safe haven status quo, and Friday’s price rise is just a beginning.

Have a great weekend!

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,627.10, up $63.40.
• Silver, $28.75, up $0.91.