Gold and Silver Finish the Week Lower

On Friday, gold (NYSEARCA:GLD) futures for December delivery increased $4.90 to settle at $1,725.10 per ounce, while silver (NYSEARCA:SLV) futures jumped 92 cents to settle at $32.42.  For the week, gold finished 3.5% lower, while silver declined 6.5%.

German Chancellor Angela Merkel and U.K. Prime Minister David Cameron were unable to reconcile their differences on plans for European treaty changes and a financial transaction tax at a meeting in Berlin on Friday.

Investor Insights: Gold Demand Increases As Central Bank Purchases Jump 566%

Though earlier today the two earlier restated their commitment to a strong Europe, they continue to disagree on the best course of action to restore financial stability.  Merkel said any changes to EU treaties to allow for greater fiscal integration should require the approval of the 17 nations sharing the euro, while Cameron wants changes to be approved more widely by all members of the union, allowing the U.K. to take back powers from Brussels.  Cameron also suggested Germany support calls to allow the European Central Bank to fund purchases of troubled sovereign debt. Earlier this week, he rebuffed Merkel’s call for political union in Europe, dismissing it as an “utopian vision.”

After Thursday’s decline, the SPDR Gold Trust ETF (NYSEARCA:GLD) gained .40%, while the iShares Silver Trust (NYSEARCA:SLV) rebounded 2.6% in afternoon trading.  Gold miners (NYSEARCA:GDX) such as Randgold Resources (NASDAQ:GOLD) and Barrick Gold (NYSE:ABX) fell 2.5% and .80%, respectively.  Yamana Gold (NYSE:AUY) annouced it has started production at its Mercedes mine in Mexico.  It expects to begin commercial production in Q2 2012.  Shares were down .40% before the closing bell.  Silver miners (NYSEARCA:SIL) outperformed gold with Endeavour Silver (NYSE:EXK) climbing 1%, and Silver Wheaton (NYSE:SLW) edging up .30%.

As the world drowns in debt, central banks continue to stock up on the yellow precious metal.  According to a new report by the World Gold Council, central bank net purchases amounted to 148.4 tonnes, the highest since central banks became net buyers of gold in 2009.  For comparison, central banks only purchased a net of 22.6 tonnes in the third quarter of last year.  This represents an amazing increase of 556%!  “Central bank buying was a highlight of the quarter. Statistics this year have been remarkable,” explained Marcus Grubb, managing director of investment at the gold council.  The Russian central bank purchased 15 tonnes in the third quarter, while Thailand increased its gold reserves by 25 tonnes.  The report states, “A number of banks continued their well-publicised programmes of buying, while a slew of new entrants emerged wishing to bolster their gold holdings in order to diversify their reserves.  We see this trend continuing into 2012.”

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