Daily Market Report 1/2/13

GOLD

Gold ended 2012 at $1,674.80 per ounce, up 7% or $109.60 per ounce for the year. This is the eleventh year in a row that ended the year higher, with an average annual increase over the past eleven years of 18.16%. 

At 8pm PDT last night, the House of Representatives passed compromise legislation (257 to 167) that originated from the Senate. This legislation dealt with many of the most important parts of the Fiscal Cliff negotiations (more information in my 1/7/13 Weekly Market Report.) President Obama quickly acknowledged in a press conference that he would sign it, and left for Hawaii.

The Fiscal Cliff legislation that passed the Senate and House of Representatives would increase deficits over the next decade by close to $4 trillion, according to the Congressional Budget Office. That estimate is based on the fact that all the Bush tax cuts covered in this legislation are now permanent for 98% of all tax payers. Therefore, this legislation is inflationary and that is why we have seen the start of a major rally in precious metals today.  

At 11am PDT today, Gold is trading at $1,689 per ounce, up $13.20 from the December 31st close on very heavy volume. 

SILVER

Silver ended 2012 at $30.17 per ounce, up 8.21% or $2.29 per ounce for the year. Silver has been up nine of the past eleven years, with an average annual increase during the past eleven years of 22.08%. With the Fiscal Cliff issue temporarily behind us (at least till late February) I expect to see a very healthy market for Silver worldwide. Look for physical demand to increase dramatically as investors around the global become more and more concerned about the value of paper money.

At 11am PDT today, Silver is up $0.84 per ounce, trading at $31.01 per ounce on a heavy volume of contracts.