The Gold price continued creeping lower today, ending the day slightly down as investors were encouraged by Greece’s passage of  austerity measures  required as part of a European debt bailout deal. Despite the passage, there are doubts as whether they will be implemented. About Greece, Matt Zeman, the senior market strategist and head trader with Kingsview Financial, said, “One thing is to do a deal, the other is to actually enforce these austerity measures … but every time you turn the TV on, you see riots and chaos.” Others are expressing doubts that a Greek bailout will actually do good. In a note to clients, analyst Edward Meir with INTL FC Stone said that Greece will not be able to avoid “an eventual default” even with monetary aid from the eurozone. Meir said, “In fact, we think the odds are high that Greece will exit the euro sooner rather than later.” Silver ended the day slightly up, while Platinum and Palladium followed Gold downward.

In a reversal of past approaches to reaching an agreement to extend the  payroll tax cut  in the U.S., Republican leaders in Congress have made an offer to forgo spending cuts they previously demanded in return for a 10-month extension of the tax cut. Additionally, they have indicated that they might move forward with a House vote on such a plan even without an agreement from Democratic congressional leaders. The proposal is widely seen as both an effort by Republicans to avoid a battle over extending the cut (such as the one this past December, in which Republicans took much of the blame for their perceived failure to negotiate with Democrats), and to avoid a Democrat-proposed surtax on the incomes of citizens making more than $1 million a year. Estimates are that the spending cut-free proposal by the Republicans would increase the country’s deficit by $94 billion.

As mentioned in today’s Mid-Day Gold & Silver Market Report, President Barack Obama sent his 2013 budget proposal to Congress. One aspect of the budget that took many investors by surprise was that it calls for a substantial tax increase (to a maximum of nearly 40 percent) on  dividend earnings  for households that make above $250,000. The budget also calls for an increase in the tax rate for long-term capital gains, from the current 15 percent to 20 percent for wealthier Americans. A former top tax official with the U.S. Treasury Department said, “Companies may be more likely to retain earnings or seek alternatives ways to distribute their earnings, such as by buying back stock.”

At 4:07 p.m. (CST), the APMEX precious metals spot prices were:

• Gold - $1,723.20 - Down $1.10.
• Silver - $33.75 - Up $0.10.

Standard & Poor’s credit rating agency  downgraded 34 Italian banks, saying, “Italy’s vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks’ significantly diminished ability to roll over their wholesale debt.” Last month, S& P downgraded Italy’s sovereign debt rating. This downgrade will force Italy’s largest bank by assets, UniCredit, to announce a 10.6 billion-euro loss in 2011’s third quarter.

Wall Street experienced its  worst day of 2012. Gold and Silver prices fell, too, as the yo-yo effect of the Greek negotiations continue. Today, the Greek deal faltered, so the euro declined, the dollar went up, and Gold and Silver went down. The European finance ministers and the Greek government will continue to work through the weekend to achieve a deal. If a deal is made, we can expect the euro to go up, the dollar to fall, and Gold and Silver to rise.

Could we be looking at  $5-per-gallon gasoline  in the U.S. this year? John Hofmeister, former chief executive of Shell Oil’s U.S. operations, said he believes there is better than a 50 percent chance. Hofmeister said, “What’s really unprecedented is developing countries, particularly China and India, have an insatiable need for more oil, and that has not been taken into account when we think of public policy in this country.” He predicts that our lack of support for domestic drilling, coupled with the uncertainty in the Middle East, could easily drive prices to the $5-per-gallon range. With that thought, have a great weekend!

At 4 p.m. (CST), the APMEX precious metals spot prices were:

• Gold - $1,724.00 – Down $16.20.
• Silver - $33.64 – Down $0.33.

For weeks now, we have seen a similar pattern emerge in both the equity and precious metals markets. If it looks like a Greek debt deal is about to get done, Gold and Silver prices go up. If news comes out indicating it may not get done, Gold and Silver prices go down. Today, Gold, Silver and equity futures were  heading lower  as this yo-yo action continues. Yesterday, a deal looked immanent. Today, eurozone finance ministers demand Greece make even more cuts in order to get a bailout. Investors should stay tuned, because this can all turn on a dime if it does, there could be sharp movement in prices.

According to the International Energy Agency (IEA), the sanctions on Iran already are  diminishing oil flows  even though the European bans on Iranian oil do not take place until July. The IEA reports, “International sanctions targeting Iran’s existing oil exports do not come into effect until July 1, but they are already having an impact on crude trade flows in Europe, Asia and the Middle East.” It appears that those countries that have been buying Iranian oil already are looking to alternative suppliers. Iran may be forced to place unsold oil in storage and possibly shut down production in the second half of the year.

Is it likely that Israel will bomb Iran this year? Alastair Newton, senior political analyst at Nomura, would answer yes. “I’ve long taken a view that sooner or later, if push comes to shove,  Israel will bomb Iran,” Newton said. “I am getting a little more concerned this year, not because of the rhetoric but because of the facts on the ground.” Newton sees Israel’s political leaders as preparing for an early general election that would see incumbent, Prime Minister Benjamin Netanyahu, comfortably elected. This does give Israel a window of opportunity ahead of U.S. elections to launch an attack.

At 8 a.m. (CST), the APMEX precious metals spot prices were:

• Gold - $1,711.90 – Down $28.30.
• Silver - $33.45 – Down $0.52.

• Gold - $1,730.30 – No change.
• Silver - $33.93 – Up $0.18.

U.S. stock futures rose and the U.S. dollar pared losses after the  jobless claims report was released this morning. The report showed that claims fell by 15,000 last week, and the four-week moving average dropped by 11,000. The four-week average is typically seen as a better indicator of trends, and it is now at its lowest level since April 2008. Gold and Silver gave up some gains after the report.

Reports have surfaced that Greek leaders  reached an austerity deal  that will allow them to receive a second bailout package. This deal will allow Greece to stave off default. The agreement follows a five-hour meeting that actually ended in deadlock.

Syrian forces  continued their bombardment of Homs  amid efforts to resolve the crisis. U.N. Secretary General Ban Ki-moon said, “I fear that the appalling brutality we are witnessing in Homs, with heavy weapons firing into civilian neighborhoods, is a grim harbinger of things to come.” Russia and China continue to back the Syrian government, while the rest of the U.N. favors a transfer of power from Syrian President Bashar al-Assad.

At 8 a.m. (CST), the APMEX precious metals spot prices were:

• Gold - $1,737.20 – Up $7.40.
• Silver - $34.07 – Up $0.30.