Daily Nugget: Gold Zig Zags Around US Issues

Yesterday’s better-than-expected jobless claims outshone the weak US GDP data yesterday, which helped to push COMEX gold lower. The gold price remains on course for its first monthly loss since June this year.

Platinum is also suffering at the moment, yesterday it dropped to its lowest sincw mid-July and is also heading for its first monthly drop in two months.

Once again Ben Bernanke sent out his troops to confuse the masses. Yesterday it was the turn of Richmond Fed President Jeffrey Lacker. Mr Lacker said he was surprised tapering had not already gone ahead, he supports a fast tapering program.

In contrast to these suddenly hawkish outlooks from the Fed, an ECB executive board member said that the bank intends to push on with its expansive monetary policies.

All anyone is talking about, it seems, is the US budget and debt ceiling debate. A government shut-down next week, or at least a partial one, is looking increasingly likely if Congress is unable to agree a budget in time. Yesterday the House of Representatives refused Obama’s request that the government run beyond September 30th. If something is agreed in time then this will merely pre-empt the headache that the debt ceiling issue is bound to be in mid-October, when the government will hit its borrowing limit.

The gold price is likely to benefit in the short-term from the debt-ceiling debate. However, it is unlikely to begin to climb at the same pace that we saw in 2011. ANZ analysts have said that they expect the gold price to be driven by the US debt ceiling debate.

Gold has fallen by 5% in as many weeks as three US factors take centre stage. Whilst tapering rumours may be over for September, the market continues to speculate on whether or not the FOMC will go ahead with it this year. More imminently however is the fiscal budget impasse and the debt ceiling debate.

Whilst the more imminent two are likely to be resolved in the next month, the tapering issue is likely to keep gold on its toes for some time. Speculators will be looking out for every economic indicator and trying to read what it means for non-tapering.

The deadlock gold finds itself in is merely short-term. Overall physical demand remains relatively unchanged. Whilst demand for gold may not have increased as the uncertainties about the US economy circulate, there is also no dumping of gold, as we have seen previously. Whilst it may seem the gold price is dictated entirely by US headlines, we have seen already this year that the real story is the flow of gold from West to East. Note, that is real gold flowing, not paper gold.

In the coming few days there will be events to look out for that are likely to affect gold and silver, and they’re not all US-centric. China’s final PMI on Monday is likely to show some improvement which will give a boost to the precious metals. However also look out for Yellen’s speech and the US’s own final PMI release. Next week also brings us a Bernanke speech, interest rate decisions from the Bank of England, Japan and ECB. But of course, everyone will be looking towards the Friday when we will receive the non-farm payrolls and unemployment rate for September.