Global gold holdings in exchange traded funds and products hit an all-time high last week.
Concerns the US may not be able to avoid going off the “fiscal cliff” at the end of the year and Greece may have trouble having its next bailout disbursement approved, caused investors to continue to build their gold ETP holdings as a hedge against worst case scenarios.
Official data last week confirmed that the Eurozone is back in recession for the first time in three years. Despite the two-year extension given to Greece to meet its fiscal targets, uncertainty remains over how the funding gap resulting from
this extension will actually be financed. [Gold ETFs and Inflation]
The Eurogroup meeting this week will be closely watched to gauge the likelihood that Greece has its next disbursement agreed upon by the Troika and necessary national parliaments by the end of the month.
Until Greece’s disbursement clears these approvals and there are clear signs the US Congress can find a fiscal compromise, markets are likely to remain on edge and demand for perceived safe havens such as gold are likely to remain high.
Fed hints at further quantitative easing
The FOMC minutes from the October meeting revealed that the US Federal Reserve is considering adding to QE3 in the new year and is open to experimenting with new tools.