Gold Flat Ahead of ECB Statement

Gold  remained flat  after  Goldman Sachs cut its 2013 gold forecasts on Wednesday and said gold’s current price cycle will likely turn next year as a rise in real interest rates on the back of improved growth offsets any further balance sheet expansion from the Federal Reserve. Silver however fell 0.04%.

US stocks rose amid optimism lawmakers will reach a budget agreement before the end of the year to avoid automatic spending cuts and tax increases. President Obama, yesterday, assured investors that a deal would happen before the end of the year. Treasuries climbed and the Dollar Index halted its longest slump in more than a year. Wall Street’s cost cuts and dismissals have helped erase more than 300,000 financial- industry jobs in the past two years, with Citibank announcing yesterday plans to cut over 10,000 jobs.

As much as the Eurozone Ministers tried to keep from allowing Greece to be rated as a default, yesterday S&P cut Greece’s debt rating from CCC to “selective default” making this the first time a Eurozone country has been in default.

Yesterday, the new Chinese Leader told global markets that he and China would remain on the same current path with economic policy and open doors to Europe as it continues to buy up government debt and assist the eurozone. These comments helped ease traders worries and reduced global risk. Traders went searching for more risk for their portfolios, after assurances from the US and China.

Gold tumbled below the 1700 price range to close at the 1695 price level and continued to decline this morning trading at 1692.95.

EFT’s continued to add precious metals reporting gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,351.54 tons, as on Dec 5. Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 9,829.15 tons, as on Dec. 5.

The Bank of Korea increased gold its reserves by 20% last month to diversify investments, boosting holdings for the fourth time since June 2011 and underscoring increased demand by central banks. The bank added 14 tons in November, bringing the total to 84.4 tons.

Today’s market focus will be the ECB meet and rate decision, the bank is expected to hold rates, it is Mr. Draghi’s statement that might move markets today, he is expected to reduce growth forecasts for the eurozone for 2012 and 2013. This might weigh on gold prices but it is not expected to change trader’s sentiment. Traders will immediately turn their attentions to the US unemployment numbers ahead of tomorrow’s nonfarm payroll release. The jobs data might help give traders a better feel to what the FOMC will do next week at its two day meeting. Markets are expecting Operation Twist to be extended.

Silver is trading this morning at 32.815 off by 14cents as precious metals and industrial metals dip on growth worries.