China's Paved With Gold And Silver

For those involved in gold investment, this week hasn’t exactly been full of Christmas cheer. Set to finish its third consecutive week lower, the price of fell nearly 1% Thursday and remains below $1,700 today. Overall it is likely to finish the week 0.3% lower.

Misbehaving Metals
Thanks to Wednesday’s news from the FOMC and the resulting sell-off in the precious metals, gold and silver investors remain frustrated. While it seems that U.S. interest rates will remain low for at least the next three years, both gold and silver were dumped in response to the announcement.

In fact, gold hasn’t really behaved normally this week, as it showed little reaction to the release of China’s manufacturing data, which added to growing evidence that the economy is recovering.

Given the time of year we shouldn't be too surprised at the lack of interest in gold. Many investors are looking to lock in profits before the end of the year, particularly given the uncertainty surrounding fiscal cliff discussions.

Silver's Drop
Silver’s run has been even worse with its biggest drop in five weeks seen Thursday. But a report from Thomson Reuters GFMS and the Silver Institute shows it remains a favorite vehicle in China. While the country was insignificant when it came to silver in the 1990s, the report says this year it is beginning to shine. This year, however, following a period of robust growth, China is now the world’s second-largest silver fabricator and is likely to become the second-largest producer, with its share of global demand and supply standing at 17% and 14%, respectively, the report said.

The fiscal cliff drama continues to drag on and on. As a result, it seems caution is the main approach from investors until some kind of progress -- if not resolution -- is reached between the two parties. It is likely the U.S. dollar will continue to gain strength as investors sell off their risky assets as the unknown continues.

Data Dump
Today manufacturing and services PMIs are released for China, the Euro zone and the U.S. Manufacturing PMIs for Germany, France and the Euro zone are all below 50, indicating further contraction.

Overnight, Japan’s Takan Large Manufacturers index came in lower than expected. Next week is one to watch for Japan given the election this Sunday.

Meanwhile, if you’re still wondering where to bring in the new year, why not try a night club in China where, ‘just for fun’, one spot has embedded 300-kilo bars of gold into the flooring of its establishment for people to walk on.