The Daily Nugget – December’s Autumn statement and gold’s choppy ride

Well the US’ budget talks seem to be looking about as successful as a chocolate teapot factory. On Monday the Democrats rejected the Republican’s counter-proposal to avoid the fiscal cliff and yesterday President Obama signaled he is ready to make some concessions once the Republicans accept tax increases on top-earners.

In response commodities, generally, felt the weight of the politicians’ bickering Monday night and this has continued into this morning. In the early hours of yesterday morning gold dipped its toe below $1700, to $1,690, the first time in a month.

The fall in the gold price on Monday night was curious, like last week’s, considering both New York and London were closed and it was quiet in Asian trading.

Gold has recovered slightly this morning as some embrace the bargain prices; however those looking to buy gold remain wary, aware of the looming fiscal cliff in the background.

Central bank gold investment

This morning, South Korea’s central bank has said that they bought 14 tonnes of gold last month ‘in order to spread portfolio risks’. The bank now owns 84.4 tonnes. Central bank gold investment is a story which will not be letting up for some time and still continues to outshine private investment, which has dropped this year. As Jim Sinclair said a long, long while ago – Be your own central bank.

For many, gold’s current price behaviour can seem confusing; we often explain its rise caused by concern over the stability of the US economy. Therefore, why is gold not exploding out of its seat?

In the short term we see there is little confidence in gold. As Ross Norman said yesterday, we can only expect gold to rise if increasing numbers of people are buying it. Whilst it is certainly supported by currency movements and economic events which cause concern, it won’t go far until increasing numbers of people become interested in gold.

The World Gold Council reported earlier this year of the 8% decrease in private gold investment this year. Those reading this should not only see this as a call to tell more people about gold, but also to embrace the low gold prices before others ‘clock-on’ to gold.

Whilst I suspect the Fiscal Cliff agreement, if one is reached, won’t be a long-term ‘fix’ the gold price will suffer in the short-term as wary investors try to increase liquidity and get into dollars. Many analysts expect this short-term choppiness to continue into the New Year ceteris parabus.

Autumn Bingo

This morning the UK is set to hear what Chancellor George Osborne has to say in his Autumn statement. Those of us on The Real Asset Company Research desk aren’t holding out a huge amount of hope, regardless of what is said it seems the general public still believe the government are playing the long game and trying to sort this mess out. A recent poll showed the respondents believe the government are working hard to slash the debt – the opposite is the case, they’re planning on increasing it by £600bn. Is this a case of lies being told or heads in the sand? A mixture of both I suspect.

Whilst the Autumn statement is going on I’ll be joining in with ‘Autumn Statement Bingo’ on Twitter. If you want to join in, pick three words/terms you think you’re likely to hear George say, tweet them at me before 12.30 (GMT) and it’s game on – whoever hears their three words first, wins. No prizes though – it’s all about the taking part…

About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles