The single biggest story affecting the U.S. economy is the fiscal cliff. Every day news agencies are waiting to hear updates from leaders on each side of the political aisle to get a sense of how things are going. Today’s update from Senate Majority Leader Harry Reid is that “it's going to be extremely difficult to get [a deal] done before Christmas.” Bipartisan bickering over budget cuts and tax increases continue to push the Dec. 31 deadline.

The Gold price initially rose today before beginning a pullback, ending a three day positive streak. Despite the lower price,  physical demand for Gold remains high, especially in China, one of the worlds biggest consumers of Gold.  U.S. demand for the Gold American Eagle  has exploded by 131 percent in November according to the U.S. Mint’s sales information. The Royal Canadian Mint also had it’s best month of sales this year in November.

At 5 p.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,711.20, Down $3.20.
• Silver, $33.03, Down $0.33.

The Gold price is relatively flat this morning as the Federal Reserve kicks off a meeting that is to last through tomorrow.  Many economists are expecting the Fed  to announce larger monthly bond purchases under the latest round of quantitative easing (QE).  Mitsubishi analyst Matthew Turner said, “If the Fed comes out with $45 billion of bond purchases, it could be the spark we need for another Gold rally.  Previous episodes of QE have seen a Gold rally.  The policy should increase inflationary expectations, and Gold acts as a hedge against inflation.”

Talks between the White House and Congressional Republicans  have reportedly taken a turn for the better, as sources say significant progress has been made with regards to the discussion on the fiscal cliff.  In a recent CNBC survey, however, the vast majority of the 48 economists polled identified “Tax/regulatory policies” or the fiscal cliff  as the biggest threat to the U.S. economy.  Kevin Giddis of Raymond James/Morgan Keegan said, “The fiscal cliff conversation has edged its way to the ‘head of the class’ when considering the possibility of a new recession.”

At 9 a.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,713.50, Down $0.90.
• Silver, $33.12, Down $0.24.

Precious Metals prices have been relatively steady in afternoon trading as most  investors are still awaiting the looming “fiscal cliff.”  “There’s a 40 percent chance of a ‘fiscal cliff’ deal before year end,” Erskine Bowles, co-chair of President Obama’s 2012 debt commission, said. The low number isn’t very attractive to investors looking for stability, but Bowles continued, “The chances of getting it done are better and that’s what’s key.” All accounts indicate President Obama will not accept any deal unless taxes are increased for the top two percent of wage earners, while most Republicans say they will not accept any deal that raises taxes at all.

After news this morning that former Italian Prime Minister Silvio Berlusconi’s political party withdrew its support of the Italian government, current Prime Minister Mario Monti announced that  he will step down at the end of the year.  Nomura economists painted a bleak picture of Italy’s situation. “We believe that, should the elections yield a fragmented government majority with limited capacity to act and deliver important reforms, the ECB would not be willing to support Italy, even in the context of significant market pressure. In this circumstance, the risk of a standoff between the ECB and Italy are non-negligible and markets would likely reassess Italian sovereign risk by assigning a higher credit risk to the sovereign,” they wrote.

At 9 a.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,714.00, Up $8.50.
• Silver, $33.31, Up $0.20.

This week is starting well for Gold prices. As of this morning Gold is on the way up thanks to the United States Federal Reserve’s upcoming meetings on Tuesday and Wednesday of this week.There are rumors that a new round of monetary easing will be announced.  “Market expectation is that there could be more quantitative easing towards the end of the month, and this will be supportive of Gold,” Lynette Tan, an analyst at Philip Futures in Singapore, said. As with prior easing measures, the Precious Metals markets tend to show a positive gain.

In Italy the economic and political news is in disarray. Ex-Prime Minister Silvio Berlusconi was removed from office under a cloud of fraud and other improper behavior in 2011.  However, only one year removed from office, there is talk of a Berlusconi comeback.  Italy is facing a possible recession, and the former leader feels inclined to step in. “The situation today is much worse than it was a year ago when I left the government out of a sense of responsibility and a love for my country. I cannot let my country fall into a recessive spiral without end. It's not possible to go on like this,” Berlusconi said. It is yet to be seen if this move back into the spotlight will help or hinder the Italian recovery process.

As the end of the year inches ever closer, so does the United States fiscal cliff.  With a deadline looming over the heads of the government, the blame game is in full affect.  The two main parties have not seen eye to eye on many things during the budget talks, and now due to time constraints, it is getting more heated than ever. Each side is busy pointing the finger at the other party across the aisle, and time is slipping away to get a deal completed.

At 9 a.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1716.80, Up $11.30.
• Silver, $33.42, Up $0.31.

After last week’s dip in the Gold market, Monday showed Gold starting December strong on  positive manufacturing news from China, regaining some of the footing lost in November. The data from a private manufacturing purchasing-managers index came in slightly stronger than anticipated. In addition, Gold could stabilize after last week’s sell off. A strategist at Credit Suisse wrote in a research note that the sell off “appears absorbed and we think prices should now stabilize before a modest recovery could take place towards the end of the year. The seasonal weakness of the U.S. dollar in December should also help.” Just as the week before, the market was in for a ride. Tuesday’s Gold market ended at its lowest point since November 4,  dropping more than one percent of its total value. There have been multiple factors that contributed to the move, such as the United States’ inability to deal with the budget crisis and the major sell-off of Gold by investors in the past week. However, some believe this has been in the making for much longer. “You cannot attribute this kind of volatility to any sudden, new fundamentals. There are obviously some large fund-algorithmic-type players moving the market around,” Bill O'Neill, partner at commodities investment firm LOGIC Advisors, said. In the days following the dip, prices started to rise. Bargain hunters who have purchased on the recent dips along with meager economic forecasts by the European Central Bank (ECB) are the cause of the modest rebound. After losing 1.6 percent over the past two days,  many Gold investors await  U.S. nonfarms payroll data to be released Friday, as well as reports from next week’s Federal Reserve meeting. “We have the ECB decision today, with some (talk) of Spain applying now for financial help, and furthermore we have the Fed decision,” LGT Capital analyst Bayram Dincer said. “Also, some people are positioning for year-end profit taking. All of this is adding to negative sentiment in the Gold market.” By the end of another up and down week, Gold has recouped some but not all of its losses, ending the week lower overall.

EUROPE STAYS THE COURSE:

The economic news in Europe seems to be on repeat from week to week. There have been reports of good, bad and indifferent. The good this week belongs to the Greeks. The announcement of the terms of the Greek debt buyback program was a boost to the economic troubles of the country.The economic issues in Greece have been well documented and many believed it was a lost cause.However, Greece announced they would be spending more than market experts previously expected. “The market is taking a fairly optimistic view that we will see a smooth implementation of these (Greek) plans,” said Ian Stannard, head of European FX strategy at Morgan Stanley in London. On the bad side of the news, there is Spain. The euro had a big upswing yesterday due to positive news out of Greece, but  some of those gains have been taken back due to negative news out of Spain.  The euro had reached a seven week high yesterday however, due to current economic issues in the area, it was not expected to last. Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, said, “There is still too much uncertainty to drive euro back to its year-to-date highs (near) $1.35 accordingly we would expect the current rally to top out.” The ECB had a meeting this week to discuss future plans, which could include the possibility of further monetary easing. When you combine the good and the bad it brings the picture into focus. The ECB held interest rates to a record low of 0.75 percent Thursday. This move hinted at the possibility of cuts next year. Recent policymakers’ comments have suggested that rate cuts are not likely in the near future however,  some have speculated that cuts might happen in March. Basically, the theme continues to be holding the course and hoping for the best.

UNITED STATES’ BIG REPORTING SURPRISE:

The fiscal cliff continues to get closer every day and there does not seem to be any major progress to report on. On the other hand, there was much to discuss in the way of job reports this week. The ADP jobs report, which shows new jobs added in the private sector,  showed a gain of 118,000 jobsin November, which is mostly in line with economists’ projections. Many investors kept an eye out for Friday’s nonfarms payroll report for more news on the job market. Economists expected those numbers to gain, but not enough to lower the unemployment rate below 7.9 percent. If one thing has been shown throughout time is to expect the unexpected. All eyes were on the jobs report this morning, with expectations of just 80,000 to 93,000 jobs added in November. When the report came out, it showed that  146,000 jobs had been added  and the unemployment rate dropped .2 percent down to 7.7 percent. Hurricane Sandy was expected to have more of a negative impact on the report, but the Labor Department said that next month’s report could show its effects more accurately. Sometimes even the “experts” get it wrong.

All eyes were on the jobs report this morning, with expectations being that just 80,000 to 93,000 jobs were added in the month of November.  When the report came out, it showed that  146,000 jobs had been added  last month, and the unemployment rate dropped to 7.7 percent from 7.9 percent.  Hurricane Sandy was expected to have more of a negative impact on the report, but the Labor Department said that next month’s report could show its effects more accurately.  The U.S. dollar and U.S. stock futures gained after the release, while Precious Metals prices fell.

Myra P. Saefong of Marketwatch.com wrote an article stating that  Silver is being viewed more and more as an investment asset.  Gijsbert Groenewegen of Silver Arrow Capital Management said that both Silver and Gold are “the ultimate currencies.  They don’t have counter-party risk and can’t be manipulated by the politicians and printed ad infinitum by writing a nominal value on a piece of paper in order to give it value by decree.”  In speaking of the differences between the two metals, Steven Kaplan of TrueContrarian.com said, “Silver usually climbs about twice as much as the price of Gold during uptrends, and declines by about twice as much during downtrends.  Silver is for investors who are willing to take about twice the amount of risk as Gold investors.”

At 9 a.m. (EST), the APMEX Precious Metals spot prices were:

• Gold, $1,699.60, Down $2.20.
• Silver, $33.01, Down $0.08.