Weekly Gold and Silver Market Recap for Dec. 21, 2012

Gold drops will fiscal cliff news

The Gold market has seen better weeks this year. The indecisiveness of the United States congress over the impending fiscal cliff has taken the precious metal market on a ride. As of mid-day on Tuesday, Gold has fallen more than $20 an ounce at mid-day. Today’s dip comes as investors eye positive developments in fiscal cliff negotiations. Julian Phillips, founder of GoldForecaster.com, believes the sudden optimism over discussions in Washington is premature by stating, “Small steps toward an agreement are [supposedly] being made in Washington, but we prefer to act on a deal, not the expectation of one.” Many analysts are still bullish on the long-term appeal of Gold. Concerning today’s price pullback, one analyst stated, “Gold is on sale and should be seriously looked at below $1,700.” It appeared that politicians are close to reaching a deal to avoid the fiscal cliff at the end of the month. “If Gold is not able to defend those key supports, one should expect a new wave of technical selling to continue,” said Adam Sarhan, chief executive of Sarhan Capital. At 2 percent down, the yellow metal saw one of the biggest drops since November 2. By the middle of the week optimism over a fiscal cliff deal started to fade and gold fell flat. The back-and-forth sentiment regarding fiscal cliff aversion leaned negatively today after Tuesday saw positive reports, which prompted a major sell-off. Gold has gained 7 percent in 2012 as central banks around the world continue to be net buyers of the metal. However, investors remain concerned over market stability, and interest rates remain close to zero. Economists, financial analysts and individual investors continue to speculate about Gold’s future as the fiscal cliff draws near. As of Friday the market started to get back some of the lost ground from the week but it won’t get back all of it. This week looks to be the worst since June for Gold, though it is still on track for yet another annual gain. Brian Lan of GoldSilver Central in Singapore said, “At the moment, the U.S. budget talks are stalling. Many are unsure if they should enter the market. Perhaps when the U.S. has more concrete news on the outcome, investors will be more comfortable taking positions again. The market volume is thin amidst all these uncertainties, and the year is coming to an end. Many of the investors prefer to take profits and just leave the market.”

It’s not all about the cliff

This week has been a repeat of last week when it comes to the news reports in the United States. There has been much talk about dealing with the fiscal cliff but, not any action as of Friday. Away from the talks in congress the world keeps going and it is not all so negative. Americans are trying to focus on the good news rather than the bad as an upcoming fiscal cliff resolution looks uncertain. Consumer spending in November increased as household purchases rose 0.4 percent. As the unemployment rate has improved and jobs are becoming more stable, Americans feel the economy is more secure. “The numbers are encouraging,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “There’s business that has to get done whether or not these guys iron out this thing in Washington in a timely fashion. We’re going to start the year off slowly and gradually build momentum” because there will probably be a last-minute deal, he said. Mild indications that the U.S. economy is improving have softened expectations that the Federal Reserve will increase its liberal spending. “The GDP number was better than forecast, so the thinking is that improving conditions in the economy might mean a light at the end of the tunnel on when the Fed will end QE3,” said Phil Streible, a senior commodity broker at R.J. O’Brien & Associates. With all the negatives surrounding the fiscal cliff there are still positives to be found.

 

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Precious metals price jump following eurozone announcement

Precious Metals prices were on the rise following losses Thursday. Precious Metals prices have been following the global economic situation and the movement of the American dollar. There is speculation that Silver is undervalued at current levels and about what actually is driving the price. Julian Phillips at silverforecaster.com said, “With the monetary stresses now and for the next few years at current levels, there is little reason why prices should fall. Gold will react more and more as a monetary metal, and the Silver prices will move with it, not with economic conditions.”

Crude oil and Gold prices began to climb this morning after European Union leaders announced a strategy to have a single financial director for the region. The European Central Bank will step into this supervisory role for banks in the eurozone. This approach should help calm the markets. In some bearish news affecting crude oil, Saudi Arabia is planning to resume an oil pipeline project that has been on hold for a reported two decades, which should relieve some concerns involving the Strait of Hormuz.

United States consumer sentiment for June fell to its lowest level since December. Americans’ attitude toward the economy isn’t necessarily optimistic now, especially from the viewpoint of those in households with incomes of more than $75,000. Richard Curtin, a survey director, said, “Since these households account for a large share of total spending, if the declines continue in the months ahead, it could have a substantial impact on total spending.”

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,599.10, Up $47.50.
  • Silver, $27.57, Up $1.22.
  • Platinum, $1,441.30, Up $53.50.
  • Palladium, $586.50, Up $21.60.
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