How does the fiscal cliff affect the prices of gold and silver?
With the US out on holiday yesterday for Veterans Day, the precious metals kicked off the week trending mostly sideways on thin volume. It seems like the action will pick up today in the US though as participants return to the market digesting a variety of headlines. After a four day decline in the euro, it has stemmed some of the liquidation today with Germany saying it is in favor of bundling yet another rescue package for Greece. Creditors, led by Germany, have extended Greece two more years to curtail its budget deficit. The broader German mentality is that it would rather keep the money flowing to Greece than risk their default and the country’s exit from the euro.
While the euro moved up from its low today so far, the longer term implications of this for the currency cannot be considered overwhelmingly positive. It likely won’t be enough to reverse the now month long downtrend for the euro and it should really be interpreted as bearish. In addition, participants in the US are also starting to become increasingly anxious over the impending US fiscal cliff. The combination of this fiscal cliff and apprehension over Greece has US bourses set to open up in the red. The rest of this week could be an interesting ride for the precious metals.
