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Gold Starts Week Higher With Fiscal Cliff in Focus

November 19, 2012 - Spot prices for gold bullion continued to hover near $1,725 per troy ounce during morning trading in London, with the spot price of gold gaining 0.61 percent to $1,723.90 per troy ounce and U.S. gold futures for December delivery up 0.5 percent to $1,723.90 per troy ounce.

Silver bullion also rallied from last week above $32.70 per troy ounce, regaining ground lost on Friday.

U.S. Treasury Secretary Timothy Geithner said Friday that Congressional leaders and the White House should be able to agree on a deal to avoid the fiscal cliff within several weeks. The indication that a deal can be reached before the series of tax increases and budget cuts take effect in January when the new Congress convenes reassured markets in early trading.

The most recent agreements, reached last week, indicated reforms need to be made to the U.S. tax code and to so-called entitlement programs.

Ole Hansen, head of commodity strategy at Saxo Bank, said if the parties reach agreement that would remove uncertainty and gold’s safe haven status but the low interest rate environment is not going away.

The Federal Reserve has pledge to maintain low, near-zero interest rates until mid-2015. Low interest rate policy is attributed as a partial driver for gold’s record-breaking performance of the past five years.

The U.S. election, prior to the current fiscal cliff debate, brought the speculative net long position of Comex gold futures and options traders higher in the week ended last Tuesday after falling for the previous four weeks, according to weekly data published Friday by the Commodity Futures Trading Commission.

Marc Ground, commodities strategist at Standard Bank, said the participants were emboldened by a belief the Obama win would ensure the continued accommodative stance on monetary policy by the U.S. Federal Reserve. It added strong physical demand also helped sustain the upward momentum.

The gold bullion held by exchange-traded funds tracked by Reuters rose to a new record last Friday just under 2,346 tonnes. Holdings in the world’s largest gold ETF also gained to a new all-time high, at 1,342.6 tonnes to end the week.

Markets will continue to closely monitor news out of Washington for indications on the U.S. fiscal cliff and an agreement by U.S. lawmakers on an equitable solution.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org

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