Gold and Silver Range Bound on Boxing Day

Gold prices are continuing the downtrend on Wednesday morning; present prices are trading lower by $3.50 at 1656.00. Asian equities have extended gains, which could be a prolonged effect from the US, posting higher closing on Monday. After Japan’s incoming Prime Minister agreed for a record monetary easing with an inflation target of 2%, the Yen weakened and crossed the 85 levels, leaving room to the dollar to appreciate by 0.05% (79.614) at present. As a result, gold came under pressure against a stronger dollar. Traders can expect gold to continue its weakness for the day as the US lawmakers prepare to meet tomorrow aiming to avoid the fiscal cliff before the year-end. A concrete deal to stem the fiscal hangover would be a negative catalyst for the metal while a stalled effort and a stretch into 2013 would be gold supportive. The European markets are closed today due to Boxing Day Holiday. Reports on Friday showed a continued improvement in the US home prices. The Richmond Fed manufacturing may also indicate a sign of growth. All these indicates stronger dollar in the evening session. Speculators should expect gold to remain under pressure for the day.

Gold futures continue to decline as the US dollar turned higher and dampened the safe-haven appeal of the precious metal.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,350.82 tons, as on Dec 21. Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 10,045.85 tons, as on Dec. 21.

Volume in gold futures was less than a quarter of the 30-day norm, with metals markets on New York’s COMEX closing earlier than usual for Tuesday’s Christmas Day holiday. Gold has been in both risks-on and risk-off modes lately, with investor’s undecided about direction for the precious metal due to the so-called U.S. “fiscal cliff.” Some analysts say an impasse in the US budget talk’s boosts gold’s safe-haven appeal. Others argue that the metal is increasingly behaving like a risk asset, which is why a budget deal could offer investors some direction.

This morning, silver prices have seen some relief from continuous battering since last week, Prices gained a little at present ($29.96, +$0.06) moving opposite of gold. Probably silver has taken cues from the strong Asian equities.

Today’s light volume will see commodities swaying on global sentiment and posturing before year end as traders close out positions ahead of possible tax changes. As risk aversion climbs, we can expect to see the US dollar to continue to climb limiting gains in the dollar denominated currencies. There are no top tier data on the calendar today, so markets are expected to remain fairly quiet.