GOLD LOWERS IN SELL-OFF:
The week started off well for Gold. As of Monday morning Gold prices stayed near five week highs in overnight trading even after the dollar strengthened. Edel Tully, an analyst at UBS AG in London said, “The uncertainties surrounding the euro group meeting on Greece have impacted the euro-dollar and in turn Gold.” However, by the end of business on Tuesday the price started to lower. One of the main reasons for the decrease has been a rebound in the value of the United States dollar. October’s demand for products such as machinery and electronics went up the most in five months. Another reason is a lower than expected demand from India. India has been the leading in Gold buying country, and when their demand goes down, the market feels the affects. The largest cause for a lower Gold price was a large sell-off in the middle of the week. More than two million ounces of Gold futures were traded in less than five minutes. “Clearly if a trader was looking to take profit on his positions then one would finesse metal into the market slowly - so not profit-taking going on here. More likely this could be a short play, with the seller looking to trigger stops below the market and thus extend the move lower significantly. If so, he certainly caught the market on the hop as the move is counter-intuitive with everything else that is going on in the economy.” Sharps Pixley chief executive Ross Norman said. Although it was a week of price dips for Gold, this year and the outlook for the future remains bright. The price of Gold has increased more than 10 percent for the year so far as investors have flocked to the yellow metal as a safe haven. Jeff Kilburg, CEO of Killir Kapital Management believes the Federal Reserve is adding value to Gold as they continue to print money. Kilburg said, “The theoretical value of Gold when you see that the monetary base grow by another 18.4 percent, $735 billion, it puts Gold at $2,000.”
EUROPE IN FLUX:
Financial news out of Europe has been all over the board as of late. Most of the news has been negative, but this week there was more positive news. A report commissioned by European think tank The Lisbon Council and Germany-based Berenberg Bank reflects good news for the eurozone debt crisis as they suggest the predicament may be contained in 2013 barring any major policy mistakes. “If the eurozone gets through the current acute crisis and stays on the reform path, it could eventually emerge from the crisis as the most dynamic of the major Western economies,” Holger Schmieding, chief economist at Berenberg Bank, said on Monday. Even the debt ridden county of Greece showed signs of improvement. The eurozone and the International Monetary Fund have reached a debt deal for Greece. The country’s debt level will be lowered to a more sustainable level, and ultimately, this deal will lead to the next $44 billion tranche of aid being released to the country. German Chancellor Angela Merkel, who many consider the political figurehead of the eurozone as Germany boasts the largest economy in the region, is coming under fire for doing the “bare minimum” to keep Greece solvent. While the eurozone news was better, the news in England was not as optimistic. The Bank of England announced today that British banks may not have sufficient funds to protect themselves against financial market mishaps. Next year the BoE’s Financial Policy Committee will have power over British bank regulation and has already encouraged the present regulator to re-evaluate the banks’ capital to accurately represent the risk of bad loans and examine fines for misconduct. “Progress by banks in raising capital has slowed and investor confidence remains low. … The Financial Services Authority should ensure that firms either raise capital or take steps to restructure their business and balance sheets in ways that do not hinder lending to the real economy,” the BoE said in its half-yearly Financial Stability Report.
THE FISCAL CLIFF AND SIGNS OF HOPE:
There were no big breakthroughs in negotiations concerning the impending fiscal cliff in the United States. Even with a lack of progress by the federal government, U.S. citizens seem optimistic. U.S. consumer confidence rose in November to its highest level since February 2008 as Americans are hopeful for the economy’s future. Consumer spending in the United States currently accounts for about 70 percent of economic activity, which is below the 90 percent level that would indicate a healthier economy. While consumers are more positive it seems that elected officials are going in the opposite direction. Senate Majority Leader Harry Reid said that Republicans and Democrats of Congress are still far apart in agreeing on proper way to avoid the fiscal cliff. Stephen Pope of Spotlight Ideas said, “I can’t believe anyone really believes that in the first serious get-together post-election, anyone will walk out and say, ‘You know what guys, we agree on everything.’ … I think you’re going to see, going forward from here, a repetition of [Tuesday], with people making grandstanding statements — a bit like how it’s gone in Europe — and trying to flex their muscles.”
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