Gold and Silver Bounce Aimlessly

Coming off of the extended Christmas holiday, as markets reopen around the world today, gold inched down in thin trade with investors keeping a close eye on talks between the White House and Congress to prevent the U.S. economy from plunging into recession next year. Republican House of representatives Speaker John Boehner urged the Democrat-controlled Senate to act to pull back from the so-called fiscal cliff and offered to at least consider any bill the upper chamber produced, raising hopes there may be a way through deadlock in Congress. The United States faces $109 billion in across-the-board spending cuts starting in January unless a deal is reached to either replace or delay them. Democrats want to switch the spending cuts to tax increases for the most part. Investors also await the release of U.S. weekly jobless claims data due today. Economists in a Reuter’s survey forecast a total of 360,000 new filings compared with 361,000 in the prior week along with new housing sales. Eco data is not expected to move markets and to have little effect on precious metals today.

Gold is currently trading at 1658.75 off by $1.95. Gold seems to be meandering aimlessly between small gains and losses. Gold ended marginally higher Wednesday, on a slightly weak dollar as efforts at reviving talks to end the stalemate in U.S. budget negotiations continued to be in focus. Silver is trading contrary to gold this morning gaining 0.030 to break above the 30.00 price. Silver gained as investors boosted holdings to a record taking advantage of the lower price of silver and the weak US dollar.

Global focus is split between Japan and the US, where Prime Minister Abe, officially took office yesterday and embarked on a battle to force the Bank of Japan to offer unlimited monetary easing to help the current economic situation. Abe has threatened to change the laws giving the bank independence if they do not follow his policy and demands. Abe’s new government is intent on improving the current economic situation regardless of the effects on the yen and possibly long term results.

Traders and speculators should be ready for the big political charade out of Washington as lawmakers point fingers at each other and at the last minute probably will announce a deal. Markets are expecting a deal to be announced late today or early tomorrow with a vote taking place as soon as Friday afternoon.

The US dollar is trading at 79.60 down 10pips this morning, while the EUR/USD climbed to trade at 1.3248 while most market forecast had expected the pair to be trading below the 1.31 level at year end.

Industrial metals are trading on the upside this morning helping to give silver a bit more of a bounce. Silver has climbed to 30.40 while copper is trading at 3.6008 adding a few pips.