Tag Archives: fiscal cliff

Jan 04

Price of Gold Weekly Recap – December 31, 2012-January 4, 2013

Posted on by

Monday Open: $1,675.20
Weekly High: $1,689.50
Weekly Low: $1,628.00
Friday Close: $1,651.70

Gold ended 2012 with a 12 year hot streak. The past decade has treated gold very well, and this yellow metal has been the talk of the town amid a global recession. Seen by investors as a safe haven, gobbled up by governments as alternative currency and watched by many as an indicator of economic turmoil, gold has had a large role in global finances in the past ten years. Although gold closed this year nearly $300 below the all-time high of $1,900 from 2011, the price of gold is still at a remarkable high, and boasts a 6% increase from the price at the end of 2011.

The markets were silent Monday and Tuesday for the New Year holiday, but reopened with a bang on Wednesday. Starting the year off right, gold responded well to the announcement on Monday that U.S. policymakers had reached an agreement regarding the fiscal cliff. Wednesday saw this week’s high of around $1,690. The fiscal cliff agreement, which had worried investors and citizens alike, rallied a global spike in trading around the globe.

Thursday, however, gold started to dip after better-than-expected unemployment data for the U.S. was released. A firmer dollar also slipped gold down a little, as these factors lessen the strength of gold as a safe haven investment.

Friday also saw losses in the gold market as investors worriedly responded to the previous day’s Federal Reserve meeting, in which members expressed mixed ideas about keeping the loose monetary policy that had been in place all of 2012. After the prolonged fiscal cliff agreement (a decision wasn’t reached until after December 31st, the cutoff date) Federal Reserve members discussed shortening the length of time for the previously decided mortgage-backed securities and long-term Treasury bonds. Some believe the policies should last until the end of 2013, some think they should end before the year, and some think there even needs to be further measures implemented.

These loose monetary agreements keep interest rates low, which at once help the economy bolster back but also create conditions rife for inflation, a positive sign for the hedge fund gold. With stricter Fed policies, gold may not be seen as such a secure hedge fund. Friday saw prices drop to the lowest since August. Gold investors will be keeping a very close eye on the Fed’s moves.

Dec 14

Price of Gold Weekly Recap – December 10-14, 2012

Posted on by

Monday Open: $1,711.90
Weekly High: $1,722.00
Weekly Low: $1,692.90
Friday Close: $1,696.30

The big news in gold trading this week was the two-day FOMC conference, economic reports for major world economies, and an automatic trading sell-off in Asian trading. The FOMC conference spiked prices on Wednesday, then sell-off sprees dropped the price for almost no reason on Thursday. Speculation abounds about whether gold has reached its limit as we head into 2013.

Monday was relatively quiet, and not much trading occurred after President Obama and House Speaker Boehner met face to face on Sunday to discuss the fiscal cliff crisis. Traders in all sectors are worried what will or won’t happen before the end of the year, and the fiscal cliff still tends to bring all commodities sectors down, but nothing new brought any light to the situation. The OECD released a report that projected that economies of the U.S., the U.K and China will grow over 2013, but that those of the European Union, Japan and Canada are expected to contract. If world economies are bouncing back, this could be a bearish factor for gold.

Yet, gold responded positively to the news from Tuesday and Wednesday’s FOMC meetings that the Federal Reserve plans to keep interest rates low for approximately the next three years, or until unemployment reaches 6.5%.  The meeting discussed the end of “Operation Twist,” and the beginning of a new bond-buying program, which will entail buying $45 billion of Treasury bonds. The price of gold rose almost $9 on Wednesday.

Yet, Thursday saw some unexpected drops from that high, as Asian trading enacted some automatic sell-stops, which forces selling once a price reaches a certain point. This same trend happened a few weeks ago, for no logical reason, adding an unpredictable factor to gold trading.

The European Union, meanwhile, reached an agreement to appoint a single bank supervisor and EU banking union, which will be a positive sign for their economic recovery. Friday stayed at the low end of the sell-off range to close the week slightly below $1,700.

Gold is undoubtedly a volatile investment at this point in time, and some predict bearish futures for gold, citing that the precious metal is nearing the end of its decade-long streak, but others retain that with the world’s biggest economies still in flux and in the midst of inflation, gold is still a safe hedge fund. Goldman Sachs predicted the end of the gold, while Morgan Stanley credited gold as the “best commodity for 2013.”

Dec 07

Price of Gold Weekly Recap – December 3-7, 2012

Posted on by

Monday Open: $1,717.20
Weekly High: $1,717.20
Weekly Low: $1,686.30
Friday Close: $1,702.80

It seems like the only thing gold investors could talk about this week was the upcoming fiscal cliff, a threat that sunk the price of gold to its lowest in four weeks, plunging the price down below $1,700. The price of gold stayed low all week but managed to dip up slightly about the $1,700 mark on Friday.

Negotiations about the fiscal cliff continued this week, but Democrats and Republicans are still undecided about how to approach the looming crisis. If an agreement is not reached by Jan. 1, automatic tax increases and spending cuts from the Bush era will go into effect. Economists believe this might send the U.S. back into a recession. Though it seems likely that politicians will indeed reach some sort of last-minute conclusion to avoid a recession, the uncertainty surrounding the matter is a drain on many markets, gold not excepted.

Monday dropped about $15, then Tuesday took a net drop of around $20, next to hit Wednesday’s low of around $1,685 – the lowest in a month. Thursday stayed fairly flat.

This week was primarily led by economic speculation as to the U.S. government’s policies regarding the fiscal cliff, but investors also looked forward to Friday when the Labor Department would release employment data for November. And indeed, Friday moved prices up a little bit.

December 10-12th is also a series of days to look forward to for gold traders, as it is the FOMC’s next annual open market meeting, in which they will discuss QE3 policies. After this past September when the Fed eased up on monetary policy, to the delight of precious metals investors, many expect that they will continue to enact policies to boost the economy, which in turn will bolster gold as a safe haven. “Operation Twist” will come to an end, a program in which the Fed sells $45 billion of short-term treasuries each month in order to buy long-term treasuries. Most do not think the Fed will continue Operation Twist, instead most likely opting to engage in a conventional bond-buying program, which would increase money-printing, inflation, and thus the confidence in gold.

Goldman Sachs predicts that the slow U.S. economic growth will force the Fed to keep printing more money for the next two years, a positive sign for gold.

Considering the volatility that gold is facing right now, some are questioning the reality of the yellow metal as a true safe haven. Still, in a Kitco survey, out of 24 respondents, 15 see prices moving up next week and 5 see prices going down, with the rest neutral.

Nov 30

Price of Gold Weekly Recap – November 26-30, 2012

Posted on by

Monday Open: $1,750.10
Weekly High: $1,751.80
Weekly Low: $1,709.90
Friday Close: $1,714.70

Gold took a striking dip mid-week but regained losses to end the month with slight gains for November. Still hovering in the $1,700 to $1,750 range, Wednesday was the most peculiar day of the week with a quick plethora of nearly unaccounted for sell-offs, but this still did not force the price down below $1,700.

Monday opened solid and stayed solid. Low volatility in all commodities markets did not affect the price of gold.

Tuesday took a slight dip from further announcements in the U.S. regarding the fiscal cliff approaching at the end of the year. If Democrats and Republicans don’t reach a fiscal agreement by December 30, an automatic $600 billion tax hike and spending freeze motion will go into affect, which could spur the economy into a recession. House of Representatives speaker John Boehner said no substantive progress has been made. However, the little amount of trading on gold due to this news indicates most gold traders believe the crisis will be resolved.

In Tuesday’s European news, a decision was made regarding Greece’s bailout money. Greece will receive a loan with the stipulation that the country will cut its debt/GDP ratio to 124% by 2020. This agreement is likely to raise the value of the euro.

The marketplace didn’t respond to either of these events on Tuesday, but Wednesday morning, one minute after trading opened, a massive sell-off occurred in gold, dropping the price nearly $30 in less than five minutes. Both the U.S. fiscal cliff and Greece’s bailout are bearish for gold, which could reasonably cause a decline in price, but the real impetus for such an immediate loss is the high volume of “sell stop” orders. These orders are automatically programmed to sell off shares once a certain price is reached – in this case, $1,730 for many traders. The bearish pull-out of the market accelerated these automatic sell-stops to result in a drastic price drop for gold, which landed at the lowest price of week, $1,710.

Dave Meger of Vision Financial Markets, pinpointed a new sell-stop number: “The new number to focus on is $1,692—that’s the 100-day moving average,” he said.

Still, the strong selling pressure on Wednesday, which caused quite a buzz, didn’t last. Gold rebounded on Thursday from bargain hunting and short covering. The Wall Street Journal reported on Wednesday that the December FOMC meeting is likely to produce more economic stimulus, which is positive for gold. The dollar was also lower on Thursday.

Friday ended lower again, the price of gold influenced by events earlier in the week that may have made traders skittish. Still, November ended with modest gains.

Nov 23

Price of Gold Weekly Recap – November 19-23, 2012

Posted on by

Monday Open: $1,729.90
Weekly High: $,1751.90
Weekly Low: $1,722.20
Friday Close: $1,751.90

It was a fairly quiet week for gold, with a few economic indications in the U.S. and Europe not doing much to fluctuate the price, though the yellow metal had a lift at the end of the week.

Monday’s trading started out bullish on a weak dollar and higher crude oil prices, combined with positive economic news in European and Asian markets. Also, President Obama gave indications that the fiscal cliff crisis is likely to be solved before the end of year.

In the Middle East, tensions were high between Israel, Egypt and Iran, but this didn’t downgrade the metal in any significant way. Geopoliticizing tensions tend to promote first a sluggishness in gold trading at first, but if they escalate, consequently they promote a rush toward gold as a stabilizing investment.

Tuesday saw pretty much all of Monday’s gains pull back, as the Middle East experienced further rifts. Ben Bernake, Chairman of the Federal Reserve, made an announcement that the fiscal cliff crisis still looms ahead unresolved, but gold only lowered slightly. Even if the fiscal cliff does pass without action, gold may be positively affected as a safe haven in an unstable economy.

Euro zone officials held a meeting on Tuesday to discuss Greece’s debt bailout, but reached no agreement, which did little to affect the price of gold except lower it slightly on continued feelings of uncertainty. Wednesday was a slow trading day ahead of the U.S. holiday weekend. In Middle Eastern news, Israel and Hamas reached a cease-fire agreement, which also affected gold little.

U.S. markets were closed Thursday for Thanksgiving and early Friday morning, so only a hush was heard on the gold front. Friday saw a fairly significant jump up about $20 from a weaker dollar, and, presumably, anticipation of Black Friday sales data.

Next week, the Israel-Hamas conflict, the Greek bailout and the Federal Reserve’s actions concerning the fiscal cliff will all be factors to monitor.

Nov 16

Price of Gold Weekly Recap – November 12-16, 2012

Posted on by

Monday Open: $1,736.80
Weekly High: $1,736.80
Weekly Low: $1,708.30
Friday Close: $1,713.70

Gold faced a pretty steady downturn all week long in response to economic uncertainty across the board. Major factors leading to the average $20 loss this week included the U.S. fiscal cliff problem that looms on the horizon, continued European debt and a slow buying season in India.

However, gold has stayed over the $1,700 mark since the beginning of November and many are still predicting a climb above $2,000 in 2013.

Monday was a slow trading day in the U.S. since it was Veteran’s Day, and the price didn’t move much. In overseas news, Greece is undergoing fresh economic stimulus after a conference on Sunday, leading to new austerity measures. China faced unexpected growth, and Japan’s economic data points to a near recession, which would be a positive sign for gold.

Tuesday began the slow path downward as disagreements arose among the European Union as to when to disperse Greek’s bailout money. European economic woes put a damper on raw commodity markets, including gold. Meanwhile, in the U.S. Democratic and Republican parties are at a standstill as to how to deal with the upcoming fiscal cliff by the end of the year. If a decision is not made by December 31st, the automatic spending cuts and tax cuts established by the Bush administration will go into effect. The uncertainty here is already showing a volatile effect on gold, but the upside is that it could make the yellow metal seem even more a safe haven.

No real price changes happened on Wednesday, despite two conferences held in the U.S. – Obama addressed the fiscal cliff and the FOMC held their regular meeting, in which they discussed methods of determining when to raise interest rates. The implication is that they will continue their current monetary policy until 2013.

Thursday saw gold take a dip on the continued worries over the fiscal cliff and Eurozone, in which it was revealed that 17 countries are now in a recession. The technical definition of a recession is when a country experiences two consecutive quarters of economic contraction.

Friday continued the four-day dip on a slightly weaker dollar and no fresh news on any of the economic issues. This week was also the beginning of festival season in India, but buying is slow there due to a late harvesting season and the high price of gold. Next week will be fairly slow as the markets will be closed for Thanksgiving. Still, some see gold gaining from the fiscal cliff worries.