You don’t need a weatherman to know which way the wind blows. – Bob Dylan
The promise of a fiscal cliff deal, like a ripe and luscious fruit, is nearly fulfilled and ready for tasting. With the removal of uncertainty came a sharp jump in gold, a nice present as we end the old year and ring in the new. Silver and all the precious metals have come along for the ride. As is always the case, however, the devil will be in the details. First analysis dribbling out of D.C. seems to indicate that this first stage of restructuring revenue and expenditures will not hurt the American economy as much as actually going over the cliff would have. So we let out a collective “Whew,” and wipe our brows.
Thus, with all the U.S. quantitative easing still in place; the Japanese poised to follow suit; and Europe slowly coming to its senses by ratcheting down its austerity mania, we may see the world economy re-inflate and gold and silver along with it. There was also news that China’s manufacturing sector rose to its highest level in nineteen months.
The dollar strengthened a bit on this last day of the year, but the near and middle-term prospects for the greenback are bearish, another good indicator for gold.
For those who feel comfortable with this kind of assessment: gold and silver are enjoying a risk-on day, meaning that in this specific set of conditions money that has been sitting on the sidelines is jumping in because the uncertainty concerning the fiscal cliff appears to be at an end. We might love or hate the final deal or half a deal, but at long last we will know where we stand and can plan accordingly. Gold will end 2012 up 7%. We are up over 200% for the entire calendar year. Happy New Year to all.
As always, wishing you good trading, Gary Wagner