The combination of U.S. congressional and presidential elections resulted in the "best result possible" for gold, says UBS. The bank also suggests that gold began to "pre-empt" President Obama's re-election during a run-up in prices Tuesday. While Obama won another term, Democrats kept control of the Senate and Republicans of the House of Representatives. "The high likelihood of political gridlock up ahead as attention now turns to the fiscal cliff and the debt ceiling certainly presents upside opportunities for gold," UBS says. Uncertainty ahead of the election had been an obstacle in recent weeks. "Now that roadblock is removed, gold investors can re-focus with more clarity and pre-position themselves ahead of the important event risks up ahead, not just of a fiscal nature but also monetary policy given the next FOMC meeting on Dec. 12 where our economists expect the conclusion of Operation Twist will morph into further quantitative easing--something that the gold market has not yet priced in," UBS says. "Of course, the implications of the U.S. elections (have) more far reaching fiscal and monetary policy implications, one of the most important ones being the retention of expectations that a dovish Fed disposition will prevail for longer. All in all, gold could not have asked for a better outcome."
By Allen Sykora of Kitco News; asykora@kitco.com
Market Nuggets: UBS: Indian Gold Demand Picks Up Ahead Of Diwali But Consistent Volume Lacking Wednesday November 7, 2012 8:17 AM
India's Diwali festival, a key time for gold buying, is now less than a week away. "Over the past week, there have been some evidence of a stronger physical appetite in light of this, but consistency in volumes is very much lacking," says UBS. "This is not necessarily unexpected, with previous years' flows indicating that demand starts to waver closer to Diwali although it is typically not until the festival itself that a significant decline in demand is observed. Looking at purchases one week before Diwali last year versus current buying reveals a 24% y/y (year-on-year) decline, while year-to-date demand is down by about 27%, based on our physical flows to the region." However, the fourth quarter is expected to be stronger sequentially and at least as strong year-on-year, UBS says. "So far, according to our flows quarter-to-date, performance is already higher by 5% compared with the first two months of Q3 and compared with the same period in Q4 2011," the bank says. "We expect the seasonal trend to continue playing out for the remainder of the year. Based on historical patterns, the few weeks following Diwali will likely see weak demand, before offtake picks up again in mid-December through to the New Year." Perhaps the main risk to Indian demand would be further weakness in the rupee, which makes the metal more expensive for Indians.
By Allen Sykora of Kitco News; asykora@kitco.com
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