Morning Gold Market Report 12/26

Compiled 12/26/12 6:00 AM (CT)

Statistics: London Gold Fix $1,662.50 N.A. LME Copper Stocks N.A. tons at 317,350 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) With continuing holidays today in many markets, the downside action in gold to start might be somewhat discounted. In looking back gold has garnered a periodic lift from fears of a trip off the fiscal cliff, which is now just 5 days away. In the early action today, gold was showing some minor negative divergence with the rest of the precious metals complex, but again that might have been the result of thinned market conditions. While US economic news will return to a more normal pace with a series of chain store sales reports early on, the main feature of the trade today is likely to come from a private home price survey. Recent improvements in the US housing sector might be challenged somewhat because of weather and the holidays, and therefore the trade might wait until the regional Fed business activity report release before deciding on the risk-on/risk-off view. A recovery in the Greenback relative to other currencies in the prior two trading sessions could be limiting gold, which has tried to return to a safe haven status at times over the past week. Gold didn't seem to get much of a lift off news overnight of a slight improvement in Indian demand in the wake of recent weakness, but it is unclear whether or not it is tracking its physical commodity market fundamentals or if the fiscal cliff issue is going to settle in and dominate near term price action. Comex gold stocks were 11.038 million ounces up 74,454 ounces. Gold stocks have increased in 16 of the last 20 days.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) Chinese equities started out softer, but prices recovered to finish in positive ground, mostly because of talk about Chinese government plans to spread development into rural areas. Indian shares were modestly higher, supposedly because of looming option expirations. European markets were subdued because of continuing holidays, but US fiscal cliff fears were reportedly limiting sentiment in a number of markets. In the US trade action today, the economic report slate will show a couple private weekly chain store sales reports, a Case-Shiller Home Price survey, and a Richmond Fed Business Activity Index report. There are reports that the President will return from Hawaii this week in an effort to work out a deal on the fiscal cliff.

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