The Daily Nugget: Is Confidence Too High For Gold Investment?

Despite festive cheer in the FTSE 100 yesterday, over in the US stock market the S&P 500 fell off the its two day rally losing 10.98 points. Gold’s bad week continued as it hovered around its 3-week low.

The sharp drop in the gold price to $1,665.30 saw some interest in gold investment from Asian buyers, but this wasn’t enough to help give it the push it needs. Sentiment does remain strong however; holdings of SPDR Gold Trust remain near a historical high at 1,350.519 tonnes.

Fiscal Cliff talks continued to stall as petty bickering appeared to take hold of each camp, with Obama accusing the Republicans of holding a personal grudge against him whilst Boehner’s spokesman, Brendan Buck said the White House’s opposition to their proposals “is growing more bizarre and irrational by the day.”

As we said yesterday, central banks have shown little let up in their monetary easing ways, Japan pressed "Go" on the printing presses this morning to deliver their round of stimulus in 4 months.

The dollar remains weakened, the Dollar Index hit a 3-month low yesterday, which has led many who have previously decided to buy gold ask why this isn’t providing much support to prices. In terms of geopolitical and economic developments this last month has been relatively quiet – little coverage of the Middle-East, no major panics in the eurozone over bailouts etc. (the euro hit a seven-month high yesterday) and the US still appear convinced that some agreement will be reached over the fiscal cliff. Therefore, confidence may be higher than one would expect, something which does not usually drive people into gold. It is also worth remembering the time of year and individuals looking to square off their positions and finish up early before the holidays.

Speaking of confidence data released in the US yesterday suggested signs of recovery in the US housing market as building permits advanced to a four-year high. This may reduce expectations of further monetary stimulus expansion from the Fed. Later today initial jobless claims will be released which are expected to be on the up whilst existing home sales and the final GDP for Q3 will be published.

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