Morning Market Update Dec 17

December 17th, 2012 by

Today marks the start of the last full week of trading before the Christmas/New Years break, and most traders have wrapped up their books and are sitting on the sidelines. The “shark in the pool” of the stalled fiscal cliff negotiations have more people than usual opting out of swim in the murky market waters, and waiting to see what happens by December 31st. Due to the limited number of players, Heraeus warns in their morning market update that “Diminishing liquidity in the market is likely to lead to choppy prices.”

Shinzo Abe of Japan’s Liberal Democratic Party was elected as Prime Minister over the weekend, on a pledge of aggressive quantitative easing by the Bank of Japan. Abe’s election is one factor cited in Commerzbank’s forecast of rising gold prices, saying “There are signs that the current price weakness is not sustainable”

Also in Asia, China reports that industrial production for the first ten months of the year was up 11% compared to 2011, giving a boost to Asian markets. Many traders look to a resurgent Chinese economy to help lift the EU and U.S. economies. In India, a stronger rupee has lowered gold prices, allowing importers to restock, but they do not seem to be induced to make any more purchases than necessary. The Indian government has taken measures such as high tariffs and a prohibition on bank loans for buy gold, in an attempt to stem gold imports.

In Europe, Spain sold its first 30-year bond in a year and a half, but the good news was outweighed by a report that EU exports were down. Bundesbank reports that the German economy contracted, further depressing the markets and the euro.

In the U.S., the dollar index is trending slightly lower, but gold did not take advantage of it until after the COMEX open.  It seems in early trading that the $1,700/oz mark is acting as a ceiling. As noted before, gold has had a habit of fading in December since 2008, but the fiscal cliff stalemate combined with gold following the stock market instead of acting opposite to it (as speculators treat it as a commodity, and not a safe haven,) as further depressed prices this year.

However the market for precious metals may look the last week, it is worth noting that gold is up 8% for the year, silver is up 16%, and platinum is up 14%.

by David Peterson