Holdings in ETPs, up 11 % this year, expanded to 2,623.446 MT yesterday,Gold dropped as the stalemate in U.S.budget talks weighed on commodities, U.S. trying to avert more than $600 billion in tax increases and spending cuts starting in January.

House Republicans, rejecting Obama’s demand for higher tax rates, countered with a $2.2 trillion deficit-cutting plan.

Spot fell 0.2 % to $1,712.35 was trading at t $1,712.88 in Asian hours . Gold February fell 0.4 % to $1,714.70 silver fell 0.6 % to $33.4538, spot platinum lost 0.3 % to $1,600.50, and palladium fell

0.8 % to $685.50

Uncertainty, normally a good thing for the Gold Price is now focused on the US Dollar, and that does raise concern to Gold traders. At the center of the Gold question is the US fiscal crisis and the possibility that it may trigger a recession and scare traders in to cash positions, a mistake in my opinion.

Our own research shows that there is no winning in the fiscal cliff debate. Obama wins, the debt ceiling is lifted again, more money is printed and the value of Gold increases. If Boeher wins, and there is a reprieve in tax hikes, more money will come back in to the market and, Gold will go up, the last thing I would want to be left holding is a bag of US Dollars.

The US Dollar is in a precarious position right now, The Fed is pumping it out at a record rate, the Government is spending it at a record rate and companies have more cash than ever before.

Politicians have reduced the Debt Ceiling to a simple political football, if the USA does not raise the debt ceiling the US Government would go in to default, I do not want a bag of US Dollars if that happens. Most likely a deal will be reached, more US Dollars will be printed, and again, I do not want a bag of US Dollars if that happens.

Gold took a dive last week after Speaker of the House John Boehner said US lawmakers from his Republican Party and Democratic President Barack Obama are in a stalemate over a budget deal needed to avoid a $600 billion “fiscal cliff” of automatic tax hikes and spending cuts.

Some institutional investors lightened their gold holdings, worried that failure to reach a budget deal could hurt economic growth and undermine gold’s appeal as an inflation hedge. “There is a significant amount of industry selling in anticipation of higher taxes related to the fiscal cliff,” said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.

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Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals. He is also an active consultant working with Corporations around the World.

He is recognized as one of the leading Economists in South East Asia, as well as the preeminent authority on ASEAN. His opinions and forecasts are widely read by decision makers in the region and Internationally.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. Copyright Live Trading News All rights reserved.