Gold made no headway this week; outlook tepid

Business

oi-Sunil

By Sunil Fernandes

Published: Saturday, December 15, 2012, 12:03 [IST]

Gold was expected to rally this week, as the US Federal Reserve announced more stimulus measures. These measures drive liquidity into the global system which ultimately finds its way into commodities and leads to a speculative rally. But, gold did not participate in any rally.
Spot gold dropped much as 1% this week to $1,694 an ounce, before recovering towards the end of the week to $1696 an ounce.

Next week much would depend on how the ongoing talks on the fiscal cliff would go about between the Republicans Congressmen and the White House. No headway could see gold slumping further. However, if there is an agreement on how to solve the fiscal cliff in the US, could certainly benefit gold.

Over the last few weeks gold has remained subdued and analysts attribute it to the fact that there has been a renewed interest in equities, shunning gold in the process.
Economic data in the US and China has been improving, and investors are preferring equities to gold. In fact, Chinese markets surged more than 4% on Friday, as risk on trade was back.

How far this trend would continue, would depend on economic data from around the globe. Encouraging economic data would mean that gold would continue to lose lustre in the short to medium term.

GoodReturns.in