Gold to One-Week Low as Democrats Show Cockiness Over Fiscal Cliff

The price of gold dropped to a one-week low at $1,717.00 per troy with U.S. gold futures down 1.4 percent in the first few minutes of floor trading on Wednesday.

According to Dow Jones’ Tatyana Shumsky, a flurry of sell orders wiped $20 from the price of gold in the opening minute of Comex floor trading, sending December futures toward $1,710 per troy ounce. More than 13,000 contracts changed hands during that first minute.

The price of silver also dropped to a one-week low at $33.73 per troy ounce.

The latest technical analysis from bullion bank Scotia Mocatta said the bank is bullish silver, looking for a retracement back to the $35.35 per troy ounce high from early October.

Meanwhile, exhibiting the difference between wider market forces and the demand for precious metals, the world’s largest gold exchange traded fund SPDR Gold Shares gained to a new all-time high yesterday at 1,345.8 tonnes.

A gain in the U.S. Dollar Index, despite uncertainty over the fiscal cliff controversy in the U.S., is also dampening the price of gold. A strong dollar makes the purchase of gold more expensive for holders of other currencies.

The fiscal cliff, an automatic series of tax hikes and spending cuts set to take effect in January, has been the cause of much talk in the markets as the political divisions in Washington make the averting the event a market influence.

Republican senator Orrin Hatch said on Tuesday that he hasn’t seen any suggestions on what the Democrats are going to do on spending. He added that there is a certain cockiness he has seen that is really astounding to him.

A commodities note today from Commerzbank said if the talks drag on this could result in significant increases in the gold price.

Typically, the U.S. fiscal cliff is supportive of the gold market as the uncertainty generated by it drives a move toward safe haven assets.

Citi analyst Jon Bergtheil said the main underlying factor supporting gold is the fiscal cliff. We’re heading into a period of uncertainty over how this matter will be solved, and until it is resolved the fiscal cliff will be supportive.

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