Comex Gold Prices have shown some small upside but Gold Bullion Prices stay close to the weakest levels in 4 months as the Fiscal Cliff stalemate drove investors to the sidelines. Gold Prices are up 5.9% this year, set for a 12th straight annual gain, as central banks from the U.S. to China and Europe took action to prop up economies and expanded Gold Reserves. Gold Prices continued gains this year too on rock-bottom interest rates, concerns over the financial stability of the Eurozone and diversification into bullion by central banks. Silver Prices gained 8.1% this year, though Silver Prices dropped 7% last week, the worst week since December 2011. Gold Prices fell 2.3% last week as U.S.budget talks stalled, the biggest loss since the period ended June 22. Gold Bullion for delivery in February declined 0.2% to $1,657 an ounce on the Comex. Gold Futures closed slightly higher than opening on Friday as disappointing US consumer confidence data and a proposal from US Speaker of the House of Representatives John Boehner to avoid the Fiscal Cliff failed to win support from his own party increased the precious metal’s safe-haven appeal. Consumer sentiment index fell to 72.9 from 74.5 according to the report released by University of Michigan. The Fiscal Cliff issues were expected to be resolved last week but since talks were stalled, Gold Markets do not expect to see any resolution to the same before the year end. In the eventuality that if there is any resolution, then there would be some form of a watered down version of the legislation stuck together with spit & glue & put together into place. Holdings in exchange-traded products backed by gold stood at 2,630.89 metric tons on Dec. 21, data tracked by Bloomberg show. Holdings have climbed 12% this year, according to the data. The Dollar Index was little changed today after advancing 0.5% on Dec. 21. Bets on a Gold Rally fell 13% to 112,421 contracts, US CFTC – Commodity Futures Trading Commission data show. Bullish Silver wagers dropped to a five-week low of 30,119 contracts.
Most Gold Trading markets remain closed until Thursday for Christmas holidays therefore trading activity in the markets will be thin. 2013 is almost sure to bring about a complete breakdown in value for paper currencies which may trigger sharp upsides in Gold and Silver for sometime. But overall 2013 will be a year of a lot of pain. Gold and Silver seem to have bottomed out for now but accessing an upside would be really difficult with thin volumes around the world due to Christmas & also the year end when most big traders & hedge funds prefer to remain on cash. Gold producers Stocks advanced today as an impasse in U.S. budget talk’s boosted demand for the precious metal as an investment haven. Alacer Gold surged 4.7% to A$4.71 and Integra Mining Ltd. climbed 2.6% to 49.75 Australian cents. Zijin Mining Group Co.,China’s biggest producer of the metal by market value, gained 2.4% to HK$3.03. US Stock Markets finished lower on Friday after a Republican plan to avoid the Fiscal Cliff failed to gain sufficient support on Thursday night, draining hopes that a deal would be reached before 2013. The Dow Jones industrial average dropped 120.88 points, or 0.91%, to 13,190.84 at the close. The S&P 500 index fell 13.54 points, or 0.94%, to 1,430.15. The Nasdaq Composite Index lost 29.38 points, or 0.96 percent, to 3,021.01.
Central Banks Change Outlook to Inflation:
A subtle shift in monetary policy making is afoot with a new generation of central bankers, striving to secure global economic recovery, prepared to challenge the old doctrine of Inflation-fighting at all costs. Mark Carney, the governor of the Bank of Canada and soon-to-be head of the Bank of England, may or may not have intended to spark a high-level debate last week over how diligently central banks should fend off inflation, reported Reuters. Policymakers from the US Federal Reserve to the Bank of Japan have reconsidered or relaxed their inflation targets — long the raison d’etre of monetary policy — and have given more emphasis to economic growth, even if that is not an official mandate. “They have reduced their slavish devotion to the sole goal of inflation targeting,” said Carl Tannenbaum, a former Fed official who is now chief economist at U.S. asset manager Northern Trust. No central banker is going to tolerate an inflation spike in order to boost employment or foster more growth. Policymakers have also largely dismissed some of the more radical alternatives to achieving their goals, most notably targeting levels of nominal gross domestic product (real GDP plus inflation). Yet with the financial crisis having starkly exposed central banks’ failure to stave off danger, and policymakers having responded by flooding world markets with trillions of dollars in cheap funding, a small run-up in inflation may no longer be the anathema it once was.
In the world’s largest economy, Fed Chairman Ben Bernanke has unleashed some $2.5 trillion in asset purchases in the last few years to boost hiring and economic growth, squarely focusing on the employment side of the U.S. central bank’s dual mandate. His approach differs to that of his veteran predecessor Alan Greenspan. The same goes for Mario Draghi who took over from Jean-Claude Trichet at the ECB and it looks like Carney, replacing Britain’s Mervyn King, fits the same pattern. The Fed last week tied low interest rates to a drop in the jobless rate to 6.5% — it stood at 7.7% last month — as long as inflation did not threaten to top 2.5%. The unprecedented move may represent the culmination of its departure from the inflation-centric model pursued by former Fed chairmen Greenspan and Paul Volcker and gave a clear signal that it would tolerate inflation above its 2% target if that was the cost of getting more Americans back to work. Carney has emphasized the idea of “flexible targeting” in which inflation could be allowed to stray from the target for longer than would normally be tolerated in order to stabilize financial markets or the economy. Carney said earlier this month that the BoC explored the idea of changing its inflation targeting mandate altogether but decided that was too risky. He stressed he was not dropping hints about his plans for Britain yet BoE policymakers were quick to push back on any notion the country should change its approach to policy. Paul Fisher, the BoE’s executive director for markets, said Britain should be wary of changing the central bank’s 2-percent inflation target and had no need to adopt the longer-term commitments its North American counterparts have made on interest rates. But while BoE Chief Economist Spencer Dale warned “there is no free lunch” when it comes to changing the central bank’s target, British finance minister George Osborne surprised some when he welcomed Carney’s opening of the debate. “If you want to change the regime you have to make a pretty strong case for doing so,” Osborne told members of parliament. In July, Carney will replace King, considered among the last of the old guard of inflation-fighting central bankers — despite mixed success in that regard — which also included BoJ Governor Masaaki Shirakawa and former ECB head Trichet. Draghi, who succeeded Trichet last year, has been careful to stick to the ECB’s price stability mantra, which is enshrined in the EU treaty and fiercely defended by Germans who are still haunted by the memory of hyperinflation in the 1920s. Yet he has also flooded the financial sector with more than one trillion euros this year and pledged to buy Eurozone government bonds in whatever amounts are needed to shore up the currency bloc. Two hard-line ECB policymakers, Axel Weber and Juergen Stark, resigned last year over the bank’s previous bond-buying program. The pair said they felt it strayed into the realm of fiscal policy and could ultimately pose inflation risks.
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