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Gold Prices Roiled by 'Fiscal Cliff' Standstill (Update 1)

Manufacturing reports from the United States and China printed Monday. The Institute for Supply Management's manufacturing index for the U.S. crept below 50 -- anything under that number constitutes a contraction in the industry. China's PMI came in slightly above 50, but failed to bolster confidence that manufacturing was trending decidedly in a positive direction.

Gold-watchers may be keeping an eye on employment numbers for the rest of this week as the ADP employment report -- a record produced from a subset of ADP payrolls of some 24 million employees who work in private industrial sectors -- weekly jobless claims and the monthly employment situation are released.

Employment numbers are a macro-economic indicator that many investors use to gauge the overall health and outlook of the economy. In theory, improving employment reports hit gold prices as people would likely retreat from the yellow metal as a safe haven. Gold prices can benefit in light of poorer labor reports as some see the precious metal as a haven investment against recession. Ultimately, though, investors often view gold as a hedge against inflation. So labor reports don't always move gold decidedly in one direction or another.

The Federal Open Market Committee, which determines the Federal Reserve's monetary policy, will report its latest forecasts on Dec. 12. This could give gold investors a better clue as to what actions the Fed may take as it pertains to the expiration of Operation Twist at the end of the year, and the open-ended, mortgage-backed security purchasing program the Fed announced in September. The market generally views both actions as inflationary policy as it requires the bank to flood the system with more liquidity.

Gold mining stocks were mixed on Tuesday. Shares of Agnico-Eagle Mines (AEM - Get Report) were dipping 2.2%, but shares of Goldcorp (GG) were adding 1.9%.

Among volume leaders, Newmont Mining (NEM) was slumping 0.36%, as Kinross Gold (KGC) was climbing 0.51%.

Gold ETFs SPDR Gold Trust (GLD) and iShares Gold Trust (IAU) were retreating 1.1%, a relatively large drop for the exchange-traded funds, and in line with gold's big Tuesday selloff.

-- Written by Joe Deaux in New York.

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AEM $33.51 0.00%
AUY $2.29 0.00%
AU $10.73 0.00%
GLD $112.32 0.00%
IAU $11.33 0.00%


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