The Daily Nugget – gold investment watches fiscal cliff

This morning gold has made a small advance thanks to a slightly stronger Euro. The gold price is expected to trade in a narrow range between $1,705 and $1730 for the next couple of sessions until it finds a direction. Whilst fiscal cliff discussions are providing some support to the gold price, analysts believe stronger buying in gold investment will be seen below $1,705.

Since the US election the markets have been under the influence of ‘watching the fiscal cliff’ watching politicians closely as they negotiate their way around it.

The fiscal cliff has meant that gains in the gold price have been kept in check. Analysts believe those interested in gold investment have remained cautious as they are unsure of the outcome of fiscal cliff. However, gold is set to make significant gains given the compromise which is more likely to be reached by politicians rather than a flat out solution.

Frosty Autumn statement

This week the talk of the town here in London is Chancellor George Osborne’s Autumn Statement – a sort of mini budget if you like, but with just as a big an impact and far more grumbles I suspect.

Last week Osborne was heralded for his decision to recruit Canada’s Mark Carney as the next Bank of England Governor. However all goodwill towards the Chancellor may soon be forgotten as he announces moves to reign in the UK’s deficit. Thanks to the OBR, he is expected to have to extend austerity to 2018, a year extra than previously thought.

PMIs, QEs etc

Later this week, on Thursday, both Bank of England and the European Central Bank will announce their interest rate decisions.

No move on either the base rate or current QE scheme is expected from the Bank of England, given the Bank’s focus on the Funding for Lending Scheme. Speaking of which, the figures for the Funding for Lending scheme have been released today, according to the report there are now 35 groups participating in the scheme, which cover just over 80% of the stock of lending to the real economy.

Former MPC member Adam Posen believes the central bank will resist ‘indefinitely’ from committing to further easing, which to him is ‘bizarre’ considering they had agreed to carry our QE until inflation was ‘well above target’. No doubt he’ll be keenly watching the BoE’s inflation expectations report on Friday which measures the percentage consumers expect the price of goods and services to change by over the next year. A reading of 3.2% is expected.

We don’t normally make a special effort to mention Canada, but given recent events we thought we would this week. Their interest rate decision will be announced tomorrow and is expected to remain at 1.00%. Employment and consumer price numbers will be announced on Friday in time for the US’ non-farm payroll and consumer confidence data release.

Manufacturing PMI for both the UK and the Eurozone were released this morning, both of which remained unchanged, as expected. The same is expected later today for the US’ manufacturing PMI. Over the rest of the week PMI data on services, construction and whole economy will be released worldwide.