Morning Gold Market Report 12/13

Compiled 12/13/12 6:00 AM (CT)

Statistics: London Gold Fix $1,694.75 -$17.75 LME Copper Stocks +675 tons at 269,875 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) With a huge range down washout late yesterday remaining in place into the Thursday US trade today, it is clear that the gold trade saw something very defeating in the wake of the Fed meeting and statement yesterday. Others suggest that gold was already vulnerable to the apparent breakdown in US fiscal cliff talks from earlier in the day Wednesday and the violation of several chart support levels simply aggravated the downside washout. Somewhat surprisingly the sharp slide in gold prices prompted some Indian gold importer buying overnight but that news clearly wasn't enough to reverse the downward bias in gold prices. Apparently the most significant bearish theme in gold over the last 24 hours, is the idea that the Fed had set specific inflation and employment targets for exiting its aggressive program of support for the US economy. Gold however saw a delayed reaction to the Fed situation, as prices didn't come under aggressive downside pressure until almost 3 hours after the close of the NYSE on Wednesday afternoon. Given the focus on the Fed and the slight increase in the risk-off mentality because of an escalation of tensions in Washington, gold might not take that much direction from US scheduled data this morning, but some traders might see the data today as a negative, as the readings are expected to be a little soft. However, if the gold trade really is concerned about the Fed pulling out of QE, sooner rather than later, then soft retail sales and a minor decline in inflation readings should provide a slight cushion to gold prices. Comex Gold Stocks were 11.459 million ounces up 38,805 ounces. Comex Gold Stocks are now at the highest levels since 03/01/2012. Gold stocks have increased 17 of the last 20 days.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) Chinese equities were weaker overnight reportedly off disappointment from the US FOMC meeting results and perhaps because of increased doubts of a US fiscal cliff deal before the end of the year. Not surprisingly, European equity markets were also under some pressure as a result of the concerns that US budget negotiations were breaking down again. However, despite international concerns toward the US fiscal cliff situation and a lack of optimism off the FOMC press conference yesterday, the US equity market was only off marginally in the early Thursday US morning trade action. The US economic report slate today brings initial and ongoing claims, which are expected to show a minor decline. Also due out during the US trade are a PPI report and retail sales figures. Retail sales might rise slightly and the PPI figures are expected to post a minimal decline.

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