Market Update - Holiday Edition & The Grinch Who Stole Gold

Well, we knew economic news would be slow this week, but we were kind of hoping that at least today would be interesting.  Earlier today Initial Claims, Chicago PMI, and Pending Homes Sales figures were released, and marked the only day of important US data for the week. Numbers were mixed with the Initial Claims being worse than expected but still comfortably under 400K, while Pending Homes Sales and the PMI data beat analyst expectations.

The lack of clear cut optimistic news though, hasn’t caused equity traders to close up shop for the year just yet.  Currently, the S&P 500 and Dow Jones are each 0.75% higher while the Nasdaq has gained over 0.5%.  Over in Europe, the morning’s slow ascent higher has escalated with the CAC 40 higher by 1.0% to 3103, while the DAX and FTSE have added 0.75%.  Today’s move in equities follows the pattern of large moves on low volumes that has occurred so far this week. Even though trader participation is expected to be even lower, volatility could be poised to continue tomorrow when end of the year trades take place.

Gold at 5 Month Lows

Gold prices continue to fall today as they hit a five month low of 1522.  In the holiday shortened week, the price of Gold has already dropped $80.  The weakness in Gold can be attricuted to the continuation of selling caused by the US FED’s FOMC Meeting earlier this month.  Since the meeting, prices are lower by about $200, as the FED stated that it wouldn’t apply new monetary stimulus. The lack of easing alongside improving US economic figures has decreased worries of stimulus driven inflation taking place.  Overall for 2011, prices of Gold are still higher by nearly $100, but are way off their highs of 1919.

Looking ahead, one of the big trading questions for 2012 will be whether Gold retains its safe haven status as interest for the Dollar rises and overall Chinese driven commodity demand slows.  One positive for the precious metal has been a rise of the ECB’s involvement in the EU’s debt crisis.  The central bank has slowly been increasing its balance sheet by injecting liquidity directly to banks.  As such, although US inflation may be limited in 2012, the EU could see price increases take place if the Euro is left to devalue.