Currency markets pushed the  American dollar higher  amid dim hopes for a European solution. Kevin Hebner, a foreign exchange strategist for JPMorgan in London, in a note to clients wrote, “For the second time in six months, Greece’s Economic and Monetary Union exit seems imminent.” Fears of a breakup of the eurozone have been driving down the value of the European currency for the past few weeks. A weak euro bolsters the American dollar, and as a consequence, typically pushes down the price of Precious Metals and other commodities.

A bit of positive news surrounding the American  housing market  was released today, indicating an increase in sales of existing homes. “We’re still a ways from looking at an encouraging picture of the U.S. economy, though when it comes to housing, every little bit helps,” said Camilla Sutton, a currency strategist at Scotia Capital in Toronto. Existing home sale prices have increased 10.1 percent from April 2011, but are still about 30 percent lower than the high water mark set in 2006. Diana Olick, a real estate reporter for CNBC, cited reductions in  bank foreclosures  and short sales as the primary driver, as fewer homes at lower price points are available for sale, thus accounting for the higher sales prices.

At 4 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,569.10, Down $21.10.
• Silver, $28.25, Up $0.17.

Some analysts suggest that once the smoke clears in the eurozone, Gold prices could start moving back up. Marcus Grubb, managing director of investment at the World Gold Council, shared his thoughts on future Gold prices, saying, “Gold, used an alternative to the U.S. dollar by investors in search of safety, could see a move higher once markets have greater clarity on a resolution to the Greek debt crisis. As we’ve seen in previous times in this crisis, like in 2008, you typically get a shift into Gold once it becomes clear what the scenario is going to look like. At the moment we still don’t know what the scenario will look like. On the other side, investors have been selling Gold as they’ve raised cash weightings, moved into the dollar, invested in Treasuries.  They’ve sold Gold in order to repair damage in their portfolios.” 

Goldman Sachs strategist Jim O’Neill spoke with CNBC about how investors and the market are reacting to Europe’s financial mess. “I can sort of see why people are freaking out. The U.S. is on the mend, and yet the markets are now obviously worried about the interconnectivity of bank lending because of the unfortunate recent episode of JPMorgan and, of course, the staggering mess in Europe.” A final election in June will determine whether Greece will stay with the eurozone. If Greece leaves, it would then initiate its own currency and would have to start paying off an estimated $618 billion in debt. 

The United States might experience slower economic growth than previously expected  with the end of extended benefits for the unemployed. This might influence some job seekers to accept jobs they otherwise would prefer not to, or give up searching for a job and drop out of the labor force. Andrew Tilton at Goldman Sachs Group Inc. is optimistic about the end of the extended benefits program. He said, “There has been an improvement in the availability of jobs. In a better labor market, people losing their benefits would be more likely to look and to find a job, and less likely to simply drop out.”

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

• Gold, $1,594.30, Up $0.90.
• Silver, $28.52, Down $0.27.

It is generally a safe bet to say that Gold and the American dollar do not move in the same direction, but that trend has not held the past couple of days. Gold bounced sharply off lows, while the dollar continued to go up. Perhaps Gold has decoupled from risk assets and is again attracting investors looking for a safe haven. Certainly there has been disconcerting front page news of late. JPMorgan lost $2 billion and now it turns out they have an additional  $100 billion tied up in similar risky bonds. Chesapeake Energy is under intense scrutiny for loans made to its chief executive.  Moody’s downgraded 16 Spanish banks, and Greece must have another election to decide how to deal with an impending economic collapse. U.S.A. stocks experienced the  longest weekly down streak of 2012. The much ballyhooed  Face book Initial Public Offering  occurred today and by most accounts fell flat on its face. There are record low mortgage rates, but no housing recovery.

The 10 year U.S.A. Treasury bonds are the go to safe haven play at the moment, despite paying historically low rates under 2 percent. If an investment is paying under 2 percent, it has a high probability of paying a negative real rate of return (factoring in inflation). Gold historically is a safe haven play and not a risk based asset. It would not surprise many investors if Gold continued to decouple from risk assets and return to its investment roots as a protector of wealth in difficult economic times.

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

• Gold, $1,593.30, Up $16.90.
• Silver, $28.74, Up $0.65.

Gold and Silver continue their trek higher this week as prices are on the rise this morning. The economic factors still loom large in regards to the eurozone debt crisis. Analyst Bayram Dincer said, “In this multi crisis environment, we are seeing a  change in attitude towards risk in Gold, so we are very optimistic. … We got to the point where the year to date performance was zero, and from a risk perspective people started to recognize that this was somewhere with lower risk compared to other asset classes.” In a note to investors, UBS wrote, “Yesterday, Gold defied a stronger dollar, weaker equities, and another raft of negative EU headlines (to rise). It felt like the Gold market of yesteryears.”

There are confirmed reports that contingency plans are in the works should Greece leave the eurozone. There had been plenty of speculative thought that this was happening but never confirmed. In an interview, European Union trade commissioner Karel De Gucht confirmed those feelings when he said, “A year and a half ago, there maybe was a risk of a domino effect. … But today there are, in the European Central Bank as well as in the commission, services working on emergency scenarios if Greece shouldn’t make it.  A Greek exit does not mean the end of the euro, as some claim.” The more severe the backlash to austerity measures, the more likely Greece is viewed to leave the eurozone. Although contingencies are being put in place, the perceived future still has Greece in the eurozone. An ECB spokesman said, “There are many, many questions arising and many questions open about Greece, and most answers have to come from Greece, and we have to respect the ongoing political process. … Clearly, the future of Greece is in the eurozone. We are working on that.”

The Group of Eight summit, which is set to begin today, is most likely to focus on what European leaders are doing to curtail the speculation of a Greek exit and fears surrounding Spanish banks. London based trader Jonathan Plant said, “We are potentially reaching a sentiment bottom but also anhour of reckoning. … European leaders must address whether it is time to extend quantitative measures or facilitate debt write downs.” The speculation surrounding Greece’s exit has basically removed about $4 trillion dollars from global markets.

At 9:10 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold: $1,589.90, Up $13.50.
• Silver: $28.42, Up $0.32.

After closing lower for four consecutive trading days,  Gold prices rebounded  today after hitting a 10-month low.

Oil prices  continued to decline today, providing some welcome relief to American consumers. “We had soft economic data and European concerns weighing on equities, and oil is being pulled along lower,” said Jason Schenker, president of Prestige Economics LLC. “Elevated concerns about the European story and disappointing U.S. economic data have been the story for two weeks now.”

Moody’s is set to announce  downgrades of several Spanish banks  this evening. According to a source with knowledge of the issue, the key reasons for the downgrades are rising loan defaults, a renewed recession, restricted funding access and the reduced ability of the government to support lenders. The Spanish newspaper El Mundo reported Wednesday that customers of the Spanish bank Bankia SA had withdrawn more than 1 billion euros from the bank since the government announced it was taking over the bank May 9. Bankia SA and the Spanish government denied that a  bank run  was under way, but markets hammered Bankia’s share price nonetheless.

Ahead of tomorrow’s  Group of Eight summit  at Camp David, President Barack Obama is urging European powers to ease austerity policies and adopt a growth strategy. The newly elected president of France, François Hollande, is expected to support Obama’s argument. Hollande defeated incumbent Nicolas Sarkozy by campaigning against austerity measures, which are deeply unpopular in some European countries.

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

• Gold – $1,575.20 – Up $37.10.
• Silver - $28.08 – Up $0.80.

• Gold – $1,556.50 – Up $18.40.
• Silver - $27.85 – Up $0.57.