Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold tumbled 1.6% as growing optimism over a possible deal on the fiscal cliff stoked risk appetite. President Obama and Speaker Boehner are reportedly getting closer to an agreement to avert the automatic $600 billion in spending cuts and tax increases scheduled to take effect on January 1. Obama has raised his tax-increase threshold to earnings of $400,000 and lowered his revenue demands to $1.2 trillion, with an offsetting $1.3 trillion in spending cuts, according to Bloomberg, while Boehner is holding out for higher taxes only on earners above $1 million. Investors piled into equities on the news, driving the S&P 500 up nearly 1.2% to its highest level in two months. Gold lost some of its safe-haven luster, closing at its lowest level in more than three months, but remained above technical support at its 200-day moving average and multi-year rising trendline at $1,660. Silver fell harder, losing 1.9%, while platinum and palladium fell 0.9% and 1.1%, respectively.

At the Comex close: February gold tumbled $27.50 to $1,670.70; March silver dropped 61 cents to $31.67; January platinum fell $14.80 to $1,593.70; and March palladium lost $7.35, to $690.95 an ounce.

Two other macroeconomic developments also contributed to gold's sell-off. U.S. homebuilder confidence rose to its highest level since 2006, adding to hopes that the housing recovery is gaining momentum. Along with optimism about the budget negotiations, this news helped to divert traders back into equities. And S&P Ratings Service upgraded Greece from Selective Default to B- on the basis of last week's buybacks of distressed debt. Eurozone lenders will now give Greece substantially better terms, lowering its risk of default and diminishing demand for gold as a hedge against debt-contagion in the region.