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US Politics Keep Gold and Silver Range Bound

By:
Barry Norman
Updated: Aug 21, 2015, 02:00 UTC

Gold climbed for the 4th day yesterday for their longest winning stretch in nearly two months, but the gains were small for a market seen as a key hedge

US Politics Keep Gold and Silver Range Bound
US Politics Keep Gold and Silver Range Bound
US Politics Keep Gold and Silver Range Bound

Gold climbed for the 4th day yesterday for their longest winning stretch in nearly two months, but the gains were small for a market seen as a key hedge to the U.S. fiscal crisis. Precious metals have climbed since December 21, though they are dipping and falling within a tight range and have gained no more than 1% in all as the US heads for another possible recession from punitive tax hikes and spending cuts scheduled to start as early as next week. Traditionally a safe-haven and inflation hedge that investors rush to in times of trouble, gold has lately behaved like any risk asset — often rising and falling with the stock market and sometimes even following the dollar. The US Dollar Index (DX) settled on a flat note after remaining volatile during the day. The index pared losses in the early part of the day after Senate majority leader said that the US fiscal cliff issue is unlikely to be resolved before December 31st 2012. This created bearish market sentiments and increased the demand for the low yielding currency that is DX.  However, towards the end of the session, the index declined as the House of Representatives planned to discuss over the fiscal cliff issue and try to avert the same on December 30th 2012.  This exerted downside pressure on the index.

 Gold traders are the most bullish in four months as US lawmakers near a deadline for budget talks, at a time when hedge funds are cutting bets on higher prices. Silver also rose by 0.40% on renewed buying interests.

US politics are becoming frenzied and hectic as traders remain focused and respond to every news release and statement. Yesterday the markets were on a high energy rollercoaster ride, falling and rising on words from Congressional leaders. Earlier in the day Harry Reid a leader of the Democratic party said that there was no deal and traders watched markets tumbled. No long after Republicans contacted members informing them that there would be a vote on Sunday as markets rallied. Later in the day, politicians mixed words and bobs while each postured and pushed their platforms and sought headlines.

Precious metal traders seemed to just move to the sidelines, with most traders already out of the markets and many having already sold gold to take profits before year end, there was very low volume, but gold and silver seemed to meander aimlessly.

Eco data in the US was fairly positive with unemployment printing at forecast while new home sales came in at a two year high, which helped bouy the US dollar. With the JPY facing historic lows and economic uncertainty, the US dollar also benefited as traders moved to safety pushing up the US dollar which kept gold locked in a tight range.

Silver on the other hand was weighed down by precious metals but was able to gain, as industrial metals traded on a positive note with strong eco data and on global sentiments. Silver continued to gain this morning to trade back above 30.00 at 30.273, while gold declined to trade at the lower end of its range at 1661.35.

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