This morning gives us another edition of a now-common theme: precious metals spot prices slowly recover overnight in Asian trading, then receive a blow at or near the opening of the COMEX. This morning was slightly different than before, in that we saw a two-step drop in gold: from $1,730 at 8:00am to $1,726 at the 8:20 COMEX opening, then a sharp drop to $1,720 starting at 8:30am. Prices immediately rose back to near the $1,724 level, where they seem to be catching their breath. Silver experienced the same behavior at the same time, as did platinum.
Consumer spending dropped in October, blamed on Hurricane Sandy, and real incomes were reported as stagnating, putting a damper on the markets today. The public bickering and grandstanding for the cameras over the Fiscal Cliff broke out yesterday, which should also shake up the markets, as they react to each soundbite. Trading should be brisk, as today is the last trading day of the month.
The euro has climbed back up to 1.3013 versus the dollar today, while the yen has fallen to 82.66 versus the dollar. The rupee strengthened to a three week high over the dollar, perhaps helping domestic gold consumption in India.
Overall, the long term prospects for gold remain bullish, as gold ETFs add 13 tons to holdings this week. Many analysts predict a resolution the U.S. debt ceiling and budget empasse as well as stabilization of the Greek debt situation. This will allow the global economy to settle, and the continued money printing by the largest central banks is anticipated to make precious metals attractive as inflation hedges.
Silver looks to continue outperforming gold in the near term, showing a 30-day rise of 8.20% compared to 1.08% for gold. Analysts expect silver prices to rise as the economy improves, due to silver’s use in electronics.