Gold and silver were on a downward move till Thursday. The decline was mainly due to the two important data reports that were published on Thursday. The US CPI edged up by 0.1% and the Philly Fed Survey showed that that manufacturing deteriorated due to Hurricane Sandy.
The US Jobless Claims reports also added to the decline in gold and silver prices.
On Thursday, the price of gold declined by 0.94% and settled at $1,713.8; Silver also decreased by 0.64% to $32.67. During November, gold slipped by 0.31%; silver rose by 1.1%.
However, Friday was altogether a different picture. Gold edged up reaching 1713 $.
The EU economic news and the ongoing US Fiscal Cliff worries put traded and investors in a risk averse frame of mind,
If the so-called fiscal cliff package of measures comes in as planned on January 1, the US economy would likely tip back into recession, which would have a devastating effect globally.
The fiscal cliff is essentially, a combination of the expiration of Bush era tax cuts, 8-10% spending cuts in defense and non-defense programs, and the raising of the debt ceiling. If all components of the Cliff were to come to pass, we would see a crippled US economy that is thrust deeply into recession, and a weakened national defense.
It will result in an increase in inflation and will thus push up gold prices even further. Some expect gold to cross the $2000 mark too.
This fiscal cliff will have the greatest effect globally and it has already taken over the Euro zone. It poses to be one of the greatest threats to global recovery,
Financial markets were also on edge after Gaza militants fired rockets at both Jerusalem and Tel Aviv, aiming for Israel’s political and commercial hearts and prompting the country to call up thousands more reservists in readiness for potential ground operations.
Moreover on the geopolitical front, the rising unrest in Israel resulted in pushing up gold and crude oil.
Israel’s pledge to take out more Hamas leaders has led to increased tensioned in the Middle East. This situation would turn investors towards gold thus pushing up gold even further.
Gold being eyed by investors will result in increased demand for gold.
Adding to this, the two world giants- India and China have also shown great demand for gold. Demand in India, the world’s biggest gold buyer, rose to 223.1 tonnes in the third quarter, a sharp jump from the 181.3 tonnes in the second quarter and the 204.8 tonnes from the same period last year
Indian demand was probably due a rebound after several weak quarters, and a strengthening rupee probably provided a catalyst for the third-quarter increase.
Chinese demand has also feel to a disappointing 176.8 tonnes in the 3rd quarter.
Slower economic growth was blamed by the council, which said stronger conditions on the 4th quarter may increase demand in china.
That is quite likely, but Chinese demand will probably only grow significantly when a rising price trend is re-established or domestic inflation rises again.
Given that China and India together account for about half of total gold demand, it seems logical to assume they are vital to the outlook for prices.
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