Gold climbed despite a fall in equities, breaking away from a recent correlation with risk. All dips in Gold and Silver henceforth should be bought pretty quickly given the Global fiscal challenges that lie in wait. Resolving any debt issues with more debt or simply delaying them to a further date will remain highly positive for Gold, but will be better for Silver. This has been seen & experienced over the past 4 years & hold true even now. But even this can prove right to a certain extent of time, which on any scale seems to be getting over stretched. Theory and reality don’t always agree & if they do so, it could last only for a certain stretch of time. There will soon come a time when even this equation collapses. Gold & Silver will surely rise as Global Debt levels are increased and / or postponed to a later date. Increased monetary easing will sharply spike up Inflation, which in turn is highly positive for Gold and Silver or also other metals to an extent. Nonetheless we regard pullbacks in Gold as a buying opportunity for now and hold strong to our near term forecast of $1,855. Just imagine a scenario where National Debts are High, Jobless numbers are high, Inflation is also high & strain & frustration on public is high & rising. All these will lead to riots, civic unrest & crime. Gold & Silver will surely get a boost but for the price rally to sustain there needs to be a continuous money supply at higher levels – Where will that come from? Gold will get sold / liquidated at higher levels to sustain daily livelihood at the commoner levels. This will increase Supply which in turn will reduce demand, which in turn will induce a crash. That time is yet to come – but does not seem too far away. Till then, a sharp upside rally in not only Gold Prices, but Silver, Metals, Crude Oil & Agro Commodities also cannot be ruled out. For more: Economic Forecast.
The equity-market sell-off Wednesday will be a “wake-up” call & Congress “will have no choice but to reach an agreement, even if it means a temporary patchwork designed to kick the can down the road. Fresh Gold buying as safe-haven demand is surfacing this week amid concerns about the approaching US Fiscal Cliff and about the European Union sovereign debt crisis. The fresh safe-haven demand in the Gold Market Thursday was further evidenced by very strong demand at a US government Treasury note auction at midday. Uncertainty about U.S. fiscal policy persists after elections and could be “problematic” for risk sentiment. U.S. election results bring clarity on monetary policy, which means the highly accommodative policy is here to stay, but not the fiscal policy. Only navigating around the ‘fiscal cliff’ is unlikely to make a substantial dent in the overall level of federal deficits, meaning that the general debasement of the US Dollar will likely continue going into 2013, providing yet another prop for Gold Prices. The Euro currency fell to a fresh two-month low Thursday amid heightened concerns regarding the European Union sovereign debt crisis. The US debt ceiling issue has also come to the front burner of the market place this week. The Bank of England kept its key interest rates & asset purchase program unchanged, which was expected. The ECB – European Central Bank did not make any changes to its monetary policy, neither did ECB president Draghi’s press conference after the meeting provided any fresh clues on ECB policy changes, also as expected. Greece parliament did pass fresh austerity measures amid violent public protests in Athens as a reaction. Also Greece’s unemployment rate rose to 25.4% in August. There is fresh speculation Spain will not ask for a financial bailout from the European Union this year. The 18th National Congress of the Communist Party of China will select a new generation of leaders over the next week. A leadership change in the key commodity-consuming nation of China will result in some type of news that would be supportive for the Base Metals pack. The start of the new government will be accompanied by convincing economic data for further growth. Further infrastructural projects are likely to be announced, which should be reflected in a robust demand for metals. China is the world’s largest consumer of Copper.
U.S. and global economic data suggests that we are on the brink of a severe global recession and or Depression. With the re-election of Obama absolutely nothing has changed and we are likely to see Gold and Silver perform as they did in Obama’s first term – gold rose 136% and silver 223%. Much of those gains were seen in the first 2 months, November and December 2008, after Obama was elected and prior to him taking office and we may see that again given the strong seasonal factors and very strong fundamentals today. The market place Wednesday digested President Obama’s re-election, which is generally believed to be bullish for the raw commodity markets, including precious metals, due to the recent very accommodative U.S. monetary policy that is likely to continue with the second term of Obama. However, focus of the market place has quickly turned to other matters. There was a keen “risk-off” mentality that set in as the session progressed Wednesday. The US stock market saw solid selling pressure and most raw commodity markets were also pushed lower. With Democrats controlling the White House and Senate but Republicans controlling the House of Representatives, is likely to mean more stand-offs over fiscal issues such as in 2011 when gold hit its record highs. The country is starting to approach the expanded debt-ceiling limit. Without a comprehensive plan to address the country’s fiscal situation, debt-ratings agencies are unlikely to look upon the U.S. favorably in the event of another showdown over finances, with the potential for a cut in US credit rating. The underlying fundamentals are very supportive of gold going forward.
Investors should prepare for price rises on more expansionary monetary policy now that President Barack Obama has won re-election, investor Jim Rogers told CNBC on news of the election. The co-founder with George Soros of the Quantum Fund said he expected Obama’s policies to drive up commodities and drive down the U.S. dollar. As the US Federal Reserve moves to ‘stimulate’ a stalled economy through debt purchases, Rogers says markets should expect the status quo to remain the same. “If Obama wins, it’s going to be more inflation, more money printing, more debt, more spending.”Rogers told CNBC, saying he expected to sell U.S. government debt and buy precious metals, such as silver and gold. “It’s not going to be good for you me or anybody else.” “It looks to me like the money printing is going to run amok now, and spending is going to run amok now,” Rogers stated. “I have to invest based on what’s happening and not what I would like.”Rogers said that he didn’t vote for either Romney or Obama, saying that “they’re both evil as far as I’m concerned.”
It’s not about national politics, it’s about policies. Until our president enacts policies that’ll alter our economic climate for the much better, Rogers and other clever investors are doing their suitable to invest in priceless metals and other safe-asserts – including Russia, according toRogers- while markets “anticipate the status to remain the exact same.” Silver and gold have actually already seen a considerable surge given that Obama won, but it’s hard to say whether that would have been any type of different if Romney had actually won the race. National politics aside,Rogers fears for our individuals and he’s especially stressed over the capacity for higher taxes. He states that has actually never ever been good for the economic climate, but he anticipates it will occur nevertheless. Rogers claims that Europe will absolutely break down following the German political election next year and also the euro is extremely unlikely to survive. That is when he says we “must all be extremely, really stressed.” The United States of America should be specifically concerned since we have not correctly recovered from 2008-2009. Each time we face a financial stagnation, the scenario worsens than the prior stagnation because our economic debt skyrockets whenever. With $ 16 trillion in debt and counting, it will not be a rather image come 2013 and 2014. Skyrocketing meals costs, failing fiat currencies, violent strikes as well as riots will all give rise to the coming worldwide situation of 2013.
India’s Diwali festival, a key time for gold buying, is now less than a week away. “Over the past week, there have been some evidence of a stronger physical appetite in light of this, but consistency in volumes is very much lacking,” says UBS. “This is not necessarily unexpected, with previous years’ flows indicating that demand starts to waver closer to Diwali although it is typically not until the festival itself that a significant decline in demand is observed. Looking at purchases one week before Diwali last year versus current buying reveals a 24% y/y (year-on-year) decline, while year-to-date India Gold Demand is down by about 27%, based on our physical flows to the region.” However, the fourth quarter is expected to be stronger sequentially and at least as strong year-on-year, UBS says. “So far, according to our flows quarter-to-date, performance is already higher by 5% compared with the first two months of Q3 and compared with the same period in Q4 2011,” the bank says. “We expect the seasonal trend to continue playing out for the remainder of the year. Based on historical patterns, the few weeks following Diwali will likely see weak demand, before off take picks up again in mid-December through to the New Year.” Perhaps the main risk to Indian demand would be further weakness in the rupee, which makes Gold more expensive for Indians.
With U.S. elections out of the way, one of the next big focuses for the gold market will be how the president and Congress deal with the so-called U.S. fiscal cliff, and “this seems likely to be supportive of bullion prices,” says HSBC. The fiscal cliff is the combination of automatic spending cuts and higher taxes scheduled to kick in at the start of 2013 if there is no action by lawmakers. HSBC points out that gold hit its record high around the time of a debt-extension standoff in summer of 2011. The bank lists three scenarios for the fiscal cliff and the likely impact on gold. One is “automatic austerity” where there is no compromise and spending cuts and tax increases occur. This would increase uncertainty in financial markets and pressure the dollar, hence supporting gold, HSBC says. A postponement of tax increases and spending cuts would mean government debt keeps rising, also dollar bearish but positive for “real assets,” including gold. “This scenario could also trigger reflation, which would we believe would be additionally supportive of gold,” HSBC says. The third scenario would be a “middle road” of some fiscal austerity and debt reduction, which poses the least threat to the dollar. “Therefore, in our opinion, it also is the least gold-bullish,” HSBC says.
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