The Daily Nugget: Gold Price Is Suffering This Morning

Christmas celebrations have left me feeling slightly worse for wear this morning and it seems the gold price is also suffering from the same affliction.

Having hit a four-month low of $1,661 in the early hours, it has climbed a wee bit up to $1,675 at the time of writing. Markets everywhere seemed to be experiencing altitude issues; EUR/USD and S&P 500 Futures shot up whilst gold and silver shot down. Analysts are now saying support levels for the gold price are to be found at $1,640.

US Fiscal Cliff negotiations are now turning to "Plan B" according to Boehner. About the time that he announced this, the sell-off in gold began. An agreement over the fiscal cliff is likely to see further damage to gold as it will provide a boost to the US dollar and likely see some movement into similar assets.

Yesterday’s fiscal cliff chatter wasn’t exactly a market-moving announcement which has led some analysts to the conclusion that the sharp-drop in gold (which was seen just a couple of weeks ago) is down to manipulation. The major sell-off seen yesterday is most likely down to selling-pressure thanks to sell-stops being triggered just below key support-levels for gold and silver. Whether this is down to active manipulation we’re not to say, however regardless of whether this was planned or not the fact remains that when it has been seen in the past the price isn’t kept down for too long.

It’s difficult not to feel disheartened with gold investing at the moment; it’s on course for the worst quarterly drop seen since Q3 of 2008. It seems incredulous that the gold price isn’t reacting in a more positive manner to the instability of the US fiscal situation and on-going issues elsewhere. It’s even more depressing when gold behaves like it did yesterday, however these price drops never last particularly long as we have seen over the last few years.

But, at risk-of sounding like a broken record, the future for precious metals investment still looks pretty shiny. Central banks are feeling exceptionally pleased with themselves and their "successful" crisis management, there have been no indicators to show a role back of their easing ideas.

When you have a media with cauliflower for brains and believe someone like Draghi is deserving of FT’s "Person of the Year" and a general public who just want to be soothed and reassured constantly it’s unsurprising central bankers are feeling pretty encouraged.

An interesting article we posted on Monday discussed the best gold-bugs of 2012. Many were surprised to see countries and banks featured on the list. But they’re not to be ignored. Many are exceptionally bullish on gold reminding those a little concerned that the need to buy gold won’t be going anywhere any time soon.

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