Gold Continues To Tumble Ahead of Holiday Selloff

 Gold fell 0.47%to the lowest since August after a report showed the U.S. economy grew more than forecast last quarter, damping expectations that the Federal Reserve will expand monetary stimulus. Gold fell close to 30.00USD yesterday and continue to tumble in Asian trading this morning, exchanging at 1642.35. Traders flocked back to the US dollar yesterday moving it from its recent low the prior day.

Gold was down as Republican leaders cancelled the vote on speaker John Boehner’s budget plan till Christmas. He failed to gather enough support from his party, thus increasing the possibility of US falling off the cliff. As we are approaching closer to the deadline and the crisis seems unavoidable, the dollar strengthened against all major currencies as a refuge for uncertainties. Gold is expected to go down as uncertainty over fiscal cliff continues and a stronger dollar will further put pressure on prices.

The bears became aggressively active against bullion, as a low volume day changed into a dramatic sell-off after LBMA pm fix. The price of gold declined by 0.22% below $1,650 and silver price fell by 1.98% to under $30.00. Physical buying along with a weaker US dollar was not enough to turn the tide from negative to breakeven. According to the CME, total market volume in gold and silver was still relatively low and if this will continue in the same manner, it could be a one side market.

Volatility has slightly subsided yesterday in gold and silver as there is a moderate decrease in the standard deviations of their daily percent change. But on a monthly basis, the daily percent change standard deviation of silver is still at higher level. The standard deviations of gold and silver on a daily percent changes basis is at 0.76% and 1.89%, respectively.

Positive eco data in the US helped support a climb in the US dollar which increased the pressure on gold. Sales of previously owned homes climbed to a three year high in Nov, reinforcing forecasts that the industry is set to contribute to U.S. annual economic growth for the first time since 2005. Purchases of existing houses increased 5.9% to a 5.04 mn annual rate, the most since Nov 2009.

The U.S. economy grew at a 3.1% annual rate in the third quarter, more than previously reported, reflecting the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap. The revised GDP reading exceeded the highest projection in a Bloomberg survey and compared with a previously estimated 2.7% gain. The Bloomberg estimate called for a 2.8% advance.

Silver countered the market fall of most commodities on Friday morning recovering as the demand for industrial metals helped its momentum on positive eco data in the US. Silver is trading at 29.773 this morning.