Gold (GLD) Rises as Investors Brace for the Worst...or Worse (SLV) (PALL)

December 24, 2012 8:53 AM EST
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Gold is the go-to for investors fearful that U.S. lawmakers will be unable to reach accords in fiscal cliff negotiations.

According to CME Group, gold February contracts are higher in early trading, up about $0.6 to $1,660.7 per ounce.

Many are hedging as over $600 billion in spending cuts and tax hikes will take effect at the start of 2013.

Last Thursday, House GOP leaders cancelled a vote over House speaker John Boehner's "Plan B" (Plan Boehner?) proposal due to lack of support. Under Boehner's plan, tax hikes will only take place for those households making over $1 million annually. The initial plan from Obama calculated hikes for householders making over $250,000, which was revised higher to $400,000 per year to be more level with GOP expectations.

As the middle-class is expected to be taxed more, it's almost certain that household spending will suffer, hitting GDP in the process. Household spending is responsible for about 70 percent of U.S. GDP.

Lack of growth will pressure the U.S. dollar, making gold contracts cheaper to outside investors in the process. That should increase demand and keep gold prices firm, if not moving higher.

Traders will be keeping an eye on the gold ETFs today, like SPDR Gold Trust (NYSE: GLD), iShares Gold Trust (NYSE: IAU), Market Vectors Gold Miners (NYSE: GDX), not to metion iShares Silver Trust (NYSE: SLV), and ETFS Physical Palladium (NYSE: PALL) as a couple one-off plays.

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