Election Day is near, and we’ll be saying goodbye to the first month since June to record a decline in gold prices, October. For buyers the month hasn’t been all that bad, considering last week holdings in gold-backed exchange-traded products reached record levels. Many investors though, have been frustrated by gold’s failure to break through $1,800 following the announcement of QE3 in September. And with the impending fiscal cliff and ghastly economic data from around the globe, one would expect gold to surge, election year or not right?
Well, the terms of the Budget Control Act of 2011 are scheduled to go into effect at the end of 2012, which has the potential to send the US back into a recession some say. Voters and bullion investors who are aware of this looming deadline commonly referred to as “the fiscal cliff”, have become interested in the candidates’ stance on this matter as it pertains to the fragile economy. Some gold buyers may decide to delay their metal purchases, expecting our next President to address this issue. Others however, rush to add to their holdings in an effort to take advantage of the “benefits” of monetary depreciation.
Over the next few days investors will be eagerly anticipating the US non-farm payroll figures (expected Friday) and of course, US electoral results soon to follow. Pending these reports and outcomes, both of which are likely to move gold prices, investors are not expecting gold to make any drastic moves. Advances in the spot price are sure to be short lived during the near term. Last week for example, the gold price received a trivial boost after consumer spending and US economic data hinted at progress. Gains were topped however as the dollar added some strength and apprehensions regarding both Greece and Spain continued.
Although last week wasn’t great for gold, it failed to break cleanly beneath $1,700. Perhaps due to the return of consumers who may have been previously put off by high prices. Merchants in Singapore for instance, are recording an increase in buying activity from India ahead of Diwali and wedding season.
Alternatively, Spanish retail numbers show a significant decline compared to last year; the euro has edged down in anticipation of this news. In Japan, retail sales were reported to have been lower than expected as well; provoking further anticipation of government stimulus. The Bank of Japan is due to get together today to make a decision concerning monetary policy; having already declared $9.4billion of stimulus a week ago.
Manufacturing statistics in the UK will be released this coming Thursday and are unlikely to match last week’s dismal news. No surprise, given the environment manufacturers still struggle with; buyers are tightening their belts while export requests remain low.
Overall, one might categorize the world bullion market as “quiet” pending the release of domestic and international data and reports impacting currency and commodity performance. The point being, the U.S. Presidential Election has joined a long list of variables influencing the market…..voters and bullion investors have a lot to think about this week.
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