Market Update: Gold, Still the One

Despite a fourth week beneath $1700, physical gold continues to inspire confidence, remaining a safe haven during this rather frantic close of the year. Gold closed up Friday at $1657.50 while silver closed up at $30.15. With the country now coming ever so close to going over the fiscal cliff, many analysts believe that the U.S. will end up doing just that. Meanwhile, forecasters are calling for the European Union to remain intact, but with significant shocks for 2013. Renewed unrest in the Congo throws Chinese mining interests in the region into flux. Ongoing tensions in Sudan, Libya, Egypt, Israel, Palestine and Syria complicates the future of oil, rare earth and precious metal prices creating a  fiscal time bomb in the region. In Asia, Japan’s growth has come to an almost complete halt, but South Korea is seeing surpluses. The Chinese business sector is chomping at the bit for a stabilized stock market, looking to initiate a backlog of IPOs. Brazil’s economy is on fire, but they are importing gold. Bolivia has made good on nationalizing a few mines and Peru may finally make that move in early 2013. The world continues to spin, and precious metals and rare earths continue to be its axis. Have a prosperous New Year.

Precious metals on the move

London Fixed PM price at week’s end, and change over previous Friday:

  • Gold: $1,657.50, up 0.4%
  • Silver: $30.15, up 0.9%
  • Platinum: $1,527, down 0.4%
  • Palladium: $704, up 4.3%

In the news

The fiscal cliff is not for the feint of heart
“The fiscal cliff is bearish; it’s higher tax rates and lower spending and it’s recessionary, so gold should have moved up a lot more by now if it’s a hedge towards that. If it’s trading as a risk asset, it should have fallen more sharply. But here we are, trapped in a range.” — Frank McGhee, head precious metals trader at Integrated Brokerage Services, Chicago (link)

In advance of a likely hike to the capital gains tax, some investors cash out their gold to avoid wealth stripping
“It’s the dollar that is keeping gold quiet today. We are seeing some flight to cash.” — Phil Streible, a senior commodity broker at R.J. O’Brien & Associates (link)

Loss of confidence to push gold and silver to “levels that most investors can’t even fathom”
“The upside for [gold and silver] are totally intact and, if anything, the upside is greatly improved because of the large physical offtake on this recent smash.” — John Embry, Chief Investment Strategist for Sprott Gold & Precious Minerals Fund (link)

Frugal Nevada loner dies leaving a $7.4 million estate in gold coins
“He was not a coin collector. He was a gold investor.” — Alan Glover, Carson City clerk (link)

Spotlight on Silver

Silver will be the “best investment of this decade”
“I think you give it time and you take the paper guys out of the market, you know the Comex, and all this ridiculous trading of paper silver that goes on… the physical story will win out and we will go back to a more normal ratio ie., 16 to 1. If we go to 16 to 1 silver will triple the performance to gold and gold will have a great performance as well, it is like a super charged story.” —  Eric Sprott, Sprott Asset Management (link)

A look at Quantitative Easing and Silver prices
“Sooner or later all the distractions keeping investors from buying silver since the QE3 expansion will evaporate, and the urge to get deployed will hit hard. Silver nearly doubled during both QE1 and QE2, and QE3 will almost certainly prove much larger!” — Adam Hamilton, CPA, is a principal, Zeal LLC (link)

The week ahead

  • The fiscal cliff  turns into a jagged river bed of a few backup measures
  • Potential downgrade of U.S. debt, even if fiscal cliff is averted?
  • Australia and South Korea continue to run stable, profitable economies
  • South Sudan gold mining legalization may be upturned by renewed unrest in Central African Republic
  • Brace yourself for frantic trading on the 31st in all global markets
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