Gold & Silver Daily Market Recap: November 28th, 2012

It was a swift sell-off in gold as it was reported a 7800 contracts were sold on the CME. Spot gold sold off to $1706 breaking through all sorts of stops.

Despite the sell-off in gold the fiscal cliff remains a bigger challenge than the lawmakers want to admit. Failure to reach a deal means tax increases and deep spending cuts take effect in five weeks,  the fiscal cliff scenario that analysts fear could push the country back into recession. On Monday, the Senate majority leader, Democrat Harry Reid, told reporters his party and the Republicans have made little progress in negotiations, adding that the Republicans had reneged on a promise to consider further tax increases as part of the deal.

It was a "perfect storm" for gold as the negotiations for the fiscal cliff rumbled on it is also month-end and option expiry so we have seen some profit taking and technical selling. A break below the $1730 mark saw stops being triggered, the market has remained well bid as funds have been light buyers through-out the day.

During the week the metals prices were given a boost with a deal being struck with Greece. On Wednesday, the Euro-area finance ministers and the IMF agreed to reduce interest rates on Greece's debt, also allowing a  suspension for 10 years on the temporary rescue fund. The ECB will also transfer its profits from its Greek bond purchases into the fund. These measures are expected to cut Greece's current 170 percent debt-to-GDP down to 124 percent in 2020. this gave the Euro a quick rally as the single currency tested 1.3000 level.

Spot silver remained buoyant despite the gold sell off, the dual role metal fell to $32.95 but quickly recovered to trade back above $33.00 at $33.75. The physical silver demand has picked up in the last few months with China leading the way. The gold silver ratio has turned sharply lower to 51.00 and now looks to target the 50.00 level.

Despite the ugly nature of the selloff technically the chart couldn't look any clearer. The "major" position that was sold this morning in gold was a long position and not a fund looking to go short. We have seen the weak longs shaken out of the market for now. We could see some more weakness leading up to Friday's month end as well as tomorrows initial jobless claims report due out of the U.S. $1705 on a technical level was key and it has held; for now; next week is the important U.S unemployment number and all eyes will be looking to see how much if any the number has changed. At this point the metals are looking like a bargain down at these levels with Central banks still being big buyers.

 November 28th Closing Prices