Gold Falls 0.5% For The Week As Holiday Season, Fed Take Impact

At the end of last week’s trading session, gold prices were below $1,700 an ounce.  While this is down for the week, it’s pretty much unchanged for the daily session, an indicator of the Federal Reserve’s recent monetary decision on policy on top of fiscal cliff worries which are rampant.

The Numbers Game

With the Comex Division of the New York Mercantile Exchange putting February’s gold (US:GCG3) down 20 cents, the tiny trading window of $1,694 to $1,701.90 gives investors a clear view of what’s to come.

As with each holiday season, tax hikes and spending cuts limit the buying and selling in the industry as buyers hold out to see what legislators will do.  The uninspired trading sessions are nothing new, but still bring clarity to gold trader’s eyes every time this time of the year comes around.

Last week, prices were 0.5% lower, with the biggest dip coming Thursday, December 13th, when gold tanked $21.10 (1.2%).  With the bulls not being able to take over the bears, per se, the quantitative easing from the Fed is taking the heat for the drop.  Apparently, the fiscal cliff is too much to overcome drops.

How The Fed Is Playing Into Things

Regardless, hardcore gold investors were still trading in the precious metal despite the Fed’s Wednesday announcement that monetary stimulus and future interest rate are linked to unemployment levels and both would have an impact.  But with the profits of gold being historically positive, speculative investors are holding on strong.

Analysts are now thinking that the Federal Reserve is broadcasting their undying support for the state of the U.S. economy in order to bolster stock.  Investors will now have a reason to hold onto their gold despite the larger statement saying that U.S consumer prices are dropping for gold.  This is probably due to the industrial production rate which rose 1.1% in November, the quickest rate over the past 24 months.

Worldwide Implications

On the other side of the globe, HSBC is reporting that the Purchasing Managers’ Index for December showed a rise in China to a 14-month high of 50.9, which caused a stock raise in Shanghai.

With that news in hand, the ICE dollar index (US: DXY) dipped from 79.925 to 79.552 this Thursday based on trading in North America.  This index show the American dollar in comparison to six major rivals proving that the inherent weakness in the greenback supports dollar-denominated commodity prices.

Market Looking Up

Boosting confidence with collectors is the thought that “short-side profit-taking and on stronger-than-expected manufacturing data from China and the U.S.,” is keeping investors interested, according to Fawad Razaqzada, the technical analyst at GFT Markets.

And with the silver in March falling down 6 cents this past Friday ($32.30 per ounce/US:SIH3) to its lowest point in the past month, buyer speculation is justified.  Still, overall profits for collectors are looking up as the typical holiday dip only scares off the rookies; this is nothing we haven’t seen before.

What do you think about what this means for collecting?  Is this an anomaly or the beginning of a trend?  Let us know what you think below!