MIXED SENTIMENTS FOR PRECIOUS METALS

  

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.

NEW YEAR "COUNT" "DOWN" FOR GOLD

                                       

Firstly, wishing all readers a Very Happy New Year in advance. As we give farewell to 2012 and welcome 2013 with a bang, we wish the same for the economy worldwide and for all markets. 

Currently, the most talked about topic this new years eve is the "THE GREAT FISCAL CLIFF " and what effect will it have globally, once some decision  is arrived on the same.

In simple terms, fiscal cliff refers to the economic effects that could result from automatic tax increases and a corresponding reduction in the US Budget deficit beginning in 2012 if existing laws remain unchanged.

Gold and silver continued to slowly change during recent days. The recent attempts of President Obama to reach an agreement with Congress regarding to avoid the fiscal cliff didn’t seem to impress investors of bullion up to now

The prices of gold and silver remained nearly unchanged in recent days as they have shifted with an unclear trend. This low movement is likely to continue especially as the trading volume is picking up following the holiday break. The recent U.S reports including new home sales and jobless claims may have contributed to the strengthening of the USD against some currencies and thus may have curbed the recent rise in the prices of gold and silver. Nonetheless, as long as the movement of precious metals remains low, this could be just a matter of market shifts or noise.

Investors and traders continue to worry about the U.S. fiscal cliff negotiations that have stalled and now with only a few days left for U.S. lawmakers to reach a deal. there was no progress on the matter as of Thursday afternoon. That did prompt some mild safe-haven demand for gold on Thursday. U.S. lawmakers have until January 3 to come to agreement before the government falls off the fiscal cliff. Uncertainty is not preferred by any market and hence most markets remain edgy  as the deadline draws closer.

President Obama was due to hold talks with congressional leaders later on Friday, as part of ongoing negotiations on how best to tackle the US federal deficit. The US economy is due to hit the so-called fiscal cliff next week unless Congress agrees to halt planned spending cuts and extend tax cuts from the Bush administration.

The spot market gold price fell back to $1660 an ounce Friday morning, close to where it started the week,  ahead of talks in Washington aimed at avoiding the $600 billion "fiscal cliff" of spending cuts and tax rises due within days.

Silver meantime eased back towards the $30 an ounce mark, while other commodity prices were little changed.

On the currency markets, the Euro fell against the Dollar Friday morning, dropping 0.6% in two hours, with traders blaming thin volumes and stop loss selling.

It’s also worth noticing the developments in India and China two of the leading importers of gold and silver worldwide. These economies haven’t performed well during 2012. Furthermore, the devolution of the Indian Rupee against the USD during the year (mainly during the first half of the year) may have curbed the demand for gold and could continue to do so in 2013. Nonetheless, if India and China will show signs of recovery during the year, this could contribute to the rise in the prices of gold and silver via an increase in the demand for these precious metals.