Gold prices have been under renewed downside pressure during late 2012 trading, with the dovish US Federal Reserve stance not proving to be enough to stop negative sentiment prevailing for now. Concerns around the global economy continue to weigh on gold as the outlook for global growth deteriorates and investors mull over the bearish IMF (International Monetary Fund) growth forecasts.
In a similar move to other central banks whose rates are near zero, the BOJ (Bank of Japan) has also now expanded its asset purchase program and announced it intended on reviewing its 1% target for inflation next month. Central bank easing is widely viewed as a positive influence on gold prices as a potential “store of value”.
The near term focus has been based upon events surrounding the so called “fiscal cliff”, the tax increases and cuts in spending, which could be triggered if US Congress fails to find a resolution in this area. Market participants continue to keep an eye on events in Washington D.C. and the White House has advised that President Obama will be cutting his Christmas holiday short to resume ongoing negotiations. Events around the fiscal cliff could see an increase in volatility for gold as politicians continue negotiations.