As word began to get around that President Obama and House Speaker John Boehner may be approaching some sort of deal to avert the fiscal cliff, gold sank to a three-month low as equities shot up. The S&P 500 Index hit its highest level—1,447.32, up 1.2 percent—in two months.
Bloomberg reports:
“If we’re seeing something substantial come out of the budget talks in terms of finally getting spending under control, then that’s bearish for gold,” Edward Meir, an analyst at INTL FCStone Inc. in New York, said in a telephone interview. “Gold has its hay day when spending is out of control.”
Futures for February were at $1,670.70, down 1.6 percent, at 1:44PM New York COMEX. Trading on Tuesday was higher than the 10-day COMEX average by 60 percent.
What analysts are calling bearish now will only be bullish later. Though many have claimed gold will lose its safe haven status on a fiscal cliff decision, continued easing from the Fed—confirmed last week—will ensure the dip is only temporary.
As the dollar loses value from the Fed’s money-printing, gold’s value will rise.
