It was a “risk-on” trading day in many markets as the world market place breathed a sigh of relief that U.S. lawmakers came to a 12th-hour agreement on the fiscal cliff.
Gold and silver continued to rally on Wednesday .The recent news from the U.S is that the fiscal cliff was averted. This news received the final confirmation as Congress approved the plan to increase taxes on household making over $400k per year. Despite this news, President Obama will still need to augment the debt ceiling in February – it currently stands on $16.4 billion. This is another uncertainty that could contribute to the market volatility in the weeks to follow.
Spot gold was last quoted up $13.50 at $1,689.25. In the Indian markets gold increased by rupees 150 and was seen trading at INR 31,500 per 10gram and silver climbed almost Rs.1000 and was trading at INR 58,800 on Wednesday.y.
Silver was seen as the biggest gainer amongst precious metals after the decision from the US lawmakers regarding fiscal cliff was reached on the 12th hour. The US lawmakers reached an agreement on taxes but decisions such as debt ceiling and government spending have been delayed as of now.
Nonetheless, it was a great sigh of relief for the cluster of markets from equities to precious metals to energy on Wednesday.
Many markets worldwide, including Asian, European and U.S. stocks were cheered by U.S. lawmakers coming to agreement on the fiscal cliff matter that had been overhanging the market place for weeks. U.S. lawmakers had to reach a deal to avoid a series of tax increases and spending cuts that would have automatically gone into effect this week.
In Asia, the Hong Kong stock market hit a fresh 19-month high on some more positive economic news coming out of China. China’s manufacturing sector continues to expand, as its manufacturing PMI increased to 50.6 in December. The recent better Chinese economic data has been an underlying bullish factor for the precious metals markets
The market place Wednesday took on a “risk-on” attitude that benefitted the precious metals.
Metals are sharply higher across the board Wednesday in a relief rally after U.S. lawmakers steered the country away from the fiscal cliff, at least for the time being.
Though silver jumped high comparatively there was not much movement in gold. It could be due to the postponement of the debt ceiling and spending cut decisions.
However, Gold prices plummeted Friday, a day after the Federal Reserve released minutes that reported mixed sentiment among Fed members about the central bank's extremely loose monetary policy.
The Federal Open Market Committee -- the Fed's policy-making wing -- said Thursday that there were potential risks to financial stability over a disorderly finish to the fiscal cliff, impending disagreements about raising the debt ceiling and possible deterioration of conditions in Europe
Simply, analysts and gold investors generally view the quantitative easing measures implemented by the Fed as inflationary policy, which makes gold a safe-haven asset to defend against inflation.
Nevertheless, analysts cautioned, more turbulence may occur in the weeks ahead since the legislation approved by Congress in essence provides only a temporary reprieve on fiscal issues and did not address the debt ceiling or include spending cuts.
The aversion of fiscal cliff has proved like a temporary power booster for all markets. But how long do these markets remain charged up is the question of the day.
However, look for the market place to now focus more on the European Union and its sovereign debt crisis, now that the U.S. fiscal cliff matter has been temporarily resolved
Looking ahead to next week, technical analysts are keeping an eye on the 200-day moving average, which comes in around $1667.50. If gold remains under that level, it could keep the metal trapped in the lower part of the current range.
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