Gold Regains Strength on End of U.S. Fiscal Crisis Posted by Adam King on January 02, 2013
With a bill finally clearing both Houses of Congress and on its way to the President’s desk, gold rebounded off lows with gains over 1 percent. Further budget battles are ahead for the American economy, but at the current time a broad global rally is underway.
U.S. gold futures for February delivery gained $18.70 to $1,694.80 per troy ounce for a gain of 1.12 percent. The spot price of gold gained $17.62 to $1,693.25 per troy ounce for a gain of 1.03 per troy ounce.
The price of gold concluded 2012 with a gain of around 7 percent for the twelfth consecutive annual gain for the precious metal. In September 2011 gold reached an all-time high at $1,923 per troy ounce when a debt crisis in Europe sparked a buying rush. Since that time, prices have been volatile with the gold market experiencing a prolonged and interrupted correction.
Following the fiscal cliff aversion agreement, Nick Trevethan, a senior metals strategist at ANZ in Singapore said investors want to see how other markets react, equity markets in particular. He added saying investors in that part of the world want to see how Europe and U.S. investors react.
A 2013 outlook from UBS stated that economic uncertainty on the outcome of the U.S. fiscal cliff in the first quarter of 2013 warrants a defensive posture. The bank said they therefore think gold and platinum are an outright buy at present levels as both metals have very low supply elasticity and are key beneficiaries of loose monetary policy.
Further, the outlook stated UBS still has a target level of $1,950 per troy ounce for gold over the next three months.
Gold is one of the best performing hedges against inflation, one of the many concerns of the central banks’ policies around the world, though the metal has been performing much as an industrial commodity lately by rising and falling with the stock market and sometimes following the dollar, per an analysis with Reuters.
Edward Meir, metals analyst at brokerage INTL FC Stone, said whatever happens in Washington, we suspect gold will likely do better over the next few weeks as the colossal failure of political will to get America’s fiscal house in order should provide fodder for the gold bugs to bid prices higher.