Gold Price Wrap-Up: Headed for Weekly Loss and Monthly Gain

on Nov 30, 2012

On November 30, Reuters reported that gold price edged up, and was on course for a monthly gain in November. Gold’s performance during the past week however was volatile, with the metal posting its largest decline in three weeks on Wednesday, dragged down by a strengthening dollar and worries about the impending US fiscal cliff.

**On Track for Monthly Gain**
Reuters reports that gold gained 0.33 percent to $1,730.4 an ounce, and was headed for a 1.3 percent weekly drop but for a 0.6 percent monthly gain. “We’re back in the middle of a range. $1,750 is difficult to break,” noted Simon Weeks, head of precious metals at Scotia Mocatta, as quoted by Reuters. “A weaker dollar is the key factor supporting the price, but gold has still not fully recovered from Wednesday’s sell-off.”

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**Gold Plunging to a Three-Week Low**
Wednesday’s sell-off marked gold’s largest decline in three weeks. On November 28, the Financial Times reported that gold slid by as much as two percent, to $1,705.64 an ounce, falling through technical support levels, before trading at $1,713.93 an ounce, down 1.6 percent on the day. The decline was prompted by concerns related to the looming fiscal cliff in the US, with gold losing ground on the back of a strengthening dollar.

“There’s ‘risk-off’ trading, and behind that is talk of the fiscal cliff becoming more of a reality than people had thought,” commented Harry Denny, a broker at Hoboken, as quoted by Bloomberg. “The fiscal-cliff resolution has everyone a little cautious.”
The plunge came after gold received a boost at the start of the week with Eurozone ministers agreeing on Greece’s additional funding. As reported by Reuters, gold traded in a tight range around $1,750 an ounce on November 27, after climbing as high as $1,751.40.

The plunge also countered analysts’ forecasts that the precious metal might test $1,800 on account of concerns that the Greek problem was not in fact solved and that central banks might resort to monetary stimulus.
**Physical Demand Picking Up after Plunge**
!m[](/uploads/story/942/thumbs/pic1_inline.png)Gold’s steep decline however proved to be temporary with the metal boosted both by fiscal cliff optimism and an increase in physical purchases. “We’ve seen very good demand after the dip and it’s interesting to see physical demand suddenly pick up,” commented Bernard Sin, head of currency and metal trading at MKS Finance SA, as quoted by Bloomberg. “The market is still worried about the fiscal cliff and how it will turn out. It’s the safe-haven logic.”

Despite the observed pick-up, the FT quotes analysts as noting the persistent lack of physical demand by consumers, seen as crucial in supporting the market. Indian investors in particular have been largely absent mostly on account of the weakness in the currency. “The gold price in India has taken a substantial step change at the start of July last year, partly due to higher gold price and partly due to a much weaker rupee,” notes Walter de Wet at Standard Bank as quoted by the FT.
Reuters however notes that the World Gold Council projects a recovery in India which will lead global gold demand in 2013 together with further strength in Chinese demand.


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