Physical buying in Asia overnight was not enough to outweigh the speculators in paper gold, as both gold and silver dropped below yesterday’s COMEX close in early New York trading this morning. UBS reported increased inflows to India and China overnight as importers take advantage of Tuesday’s technical pressure, and even Europe picked up physical gold buying.
European stocks hit a 18-month high as good economic news from Germany accompanied Standard & Poors upgrading Greek debt. The euro is now trading at a 7-month high against the dollar. Precious metals usually gain on a weak dollar and strengthening oil prices, as we’ve seen the last two days, but the light pre-Christmas volume on the markets have left them susceptible to actions of larger players. Without a large normal-acting volume, any aggressive move to drop gold prices has a magnified effect, and allows them to trip stop-sells, which creates an avalanche effect.
In the U.S., time is ticking down on the fiscal cliff deadline, as the two sides slowly move closer. The expectations of a deal have the markets’ attention, with any inflationary pressures caused by the Fed’s quantitative easing pushed to the back of the list. A debt/deficit deal is presumed to be a signal to industry to unlock the capital expenditures that have been put on hold due to tax uncertainties, which is expected to lift the economy.