Gold, the USD and JPY Weak in Early Trading

This morning gold fell a few dollars trading at 1692.85 off by 4.15 after prices on Friday managed marginal gains, however ended the week on a negative note. On speculative front, CFTC reported that funds added 3,792 contracts to their net long positions in COMEX gold futures. Meanwhile, speculators were less optimistic on silver, cutting net longs by 1,989 lots. Silver declined 0.02% to but soared on Monday morning to trade at 32.338 on the strength of industrial metals.

With market focus the “US Fiscal Cliff”, Republican House speaker John Boehner stated that he would agree to raise tax rates for Americans earning more than US$1mn a year provided President Obama agrees to spending cuts and entitlement reform. However, Boehner’s offer does not commensurate with President’s US$250,000 lower limit. This step is beginning to assure traders as they begin to see a bit of give and take, meaning a deal is possible. Investors remain apprehensive regarding the lack of progress from the ongoing US fiscal cliff negotiations. There also lies a probability of no fiscal cliff agreement before this year‐end deadline. US Congress is going for a Christmas holiday from 21^st December, so there is serious time constraint in getting the house in order. Although President Obama has warned lawmakers that they should not be making Christmas plans as he would keep members working until there is an agreement, but this is standard for US lawmakers.

Egypt’s largest gold producer, the Australia based Centamin PLC, has been allowed by the government to export around 1.6 tons of the gold extracted from its Sukari mine, Al-Ahram’s Arabic-language news website reported Sunday. Indian gold importers continued to stock up for the wedding season, taking advantage as prices fell, weighed by a stronger rupee, and bracing for a year-end shut down by refiners for account closing.

The US Dollar dropped for a fifth straight day against the Euro after a U.S. report showed prices fell in November for the first time in six months. The euro rallied to its highest against the greenback since early May on Friday. Markets are a bit confusing with both the US dollar and gold weak, these assets usually do not move in tandem. The JPY, the US dollar and gold, three primary safe havens all continue to decline, which indicates that markets are seeking more risk or a theory is that a lot of traders are selling profitable investments to ahead of the year end to book profits. While American traders are leery about tax changes so close to the end of the year. With US policymakers hashing out a deal, the outcome of these tax changes could have a lot of implication on profits and tax strategies and are therefore leaving the markets and selling off both profitable and losing positions.

Traders are also still digest the comments of Mr. Bernanke after Wednesday’s surprise changes by the FOMC, attaching monetary stimulus directly to unemployment and inflation and also a change in guidance lowering the US GDP slightly downwards.

This week’s focus will remain the “US Fiscal Cliff” ahead of the Christmas holidays, retail numbers are projecting a strong Christmas season, which is helping the equities markets. Gold is expected to be rangebound this week.