Gold Price Drops As U.S. Fiscal Cliff Fears Subside

Those looking to invest in gold in India this week have been put off by the soaring rupee price, which reached a record high of 32,640 rupees ($585.50) per 10 grams on Monday. However, the latest predictions see India’s gold investments reach 800 tonnes this year, an increase of over 20% from previous World Gold Council predictions.

Despite government moves to reduce physical gold imports, Indian citizens seem determined to keep investing in gold, the only asset they truly trust. This weekend Subir Gokarn, deputy governor of India’s central bank, said they were looking at introducing financial, gold-backed products which replicated the benefits seen from physical gold investment, without the physical stuff.

He seems to be missing a trick there – the ‘physical’ element is why gold is so popular in India, they can hold it, store it and they know exactly what they’re dealing with. None of which you can say for any government offered gold imitating financial products. When physical gold investment products are highly liquid, who needs ETFs et al.

Gold price drops on Fiscal Cliff reassurances
Relief over the Greek debt deal seems to have waned somewhat as attentions are turned to the US’s metaphysical cliff – the Fiscal Cliff. Issues surrounding the fiscal cliff are seemingly down to political compromise and negotiations. Everyone is aware of this and therefore the consensus appears to be that an agreement will be reached at the last minute. However, underlying concerns will still provide some support to gold.

Data released yesterday allowed for some nuggets of optimism in regard to the US economic recovery. Consumer confidence increased to a four-month high whilst housing prices and durable goods data also lightened the otherwise gloomy economic outlook.

Confidence surrounding impending fiscal cliff rescue and slightly improved data strengthened the dollar somewhat as gold began to look less appealing to the short-sighted amongst us. However, holdings in SPDR Gold trust rose to a record high of 1,345.813 tonnes indicating many still continue to find refuge away from the instability of central banks’ and governments’ decisions.

Confidence isn’t looking great everywhere however. CityAM this morning report on a Harvard Business Review survey which showed Chief Executives across the globe believe things won’t be getting better any time soon. 65% of respondents believe the economy will decline in coming months, 84% see the Eurozone as their biggest concern with just a under a quarter of them convinced the euro will no longer exist in two years. Only 25% believe the US will retain its crown as global leader, compared to 46% who believe China will be ahead in ten years’ time.

Money money printing and emigration in 2013
Perhaps the survey’s respondents saw a preview of De La Rue’s (DLAR.L) trading statement. The company’s profits were thanks to an increase in British passport printing. The company does, however, believe orders for banknotes will increase in 2013 – have they been given a head’s up by a few central bankers? Are they the one’s requesting new passports before they print the country to ruin?

Silver, as we keep briefly mentioning, has been quite a trooper of late and it will seemingly continue to be so, in the long run. A Thomson Reuters GFMS commissioned survey finds the silver market will experience ‘a decline and recovery cycle that will see industrial demand reach a new high in 2014.’ This year industrial demand for silver has fallen 6% (it has, however still increased in price), but a recovery is expected to be seen in this quarter which will continue into 2013 before reaching new highs in 2014. Why not read more about how to invest in silver?

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