Last Updated : 24 December 2012 at 12:00 IST
The news from the fiscal cliff not being encouraging, one may think that the Mayan Calendar which predicted an end-of-the-world-scenario for December 21 has missed the date by ten days. But optimism still persists.
Chances are less that US would go off the cliff, according to Kunal Shah, Head of Commodity Research at Nirmal Bang Commodities.
“I am optimistic of a resolution to fiscal cliff.” he said as he was hopeful that a meeting slated for 27th December would bring about significant changes.
“And before 31st December a concrete resolution may be arrived at.” he added.
US Congress is now on holiday until December 27.
“And I expect 27 December to be a day of volatility and speculation.” he said. Traders are advised to stay away from the markets for the day.” he cautioned. He also advised traders not to short base metals as US and China data have been positive for the past days.
The Chinese manufacturing has expanded and US GDP has grown by 3.1%. Besides the Bank of Japan has opted for a $110 billion stimulus measure. “Besides, effort continues in Europe to get out of the crisis.”
He explained that the recent sell-off in gold was a result of money-managers world-wide thinking “the worst for financial markets being over.”
The fiscal cliff issue is looming large on the horizon taking sheen off commodity bull trading.
Crude oil prices are trading low on account of a resolution to the cliff issue not being in sight. Thursday had seen the collapse of Republican Speaker John Boehner's proposal to tax the extreme rich as his own peers decided not to support the same; not to speak of the opposition from Senate Democrats and President Obama.
Sen. Joe Lieberman said to AP ''it's the first time that I feel it's more likely we'll go over the cliff than not.''
Meanwhile, there are also views coming in that US may go off the cliff but would recover in a span of 2-3 months.
“Gold, silver may come under pressure for a while.” said Manoj Kumar Jain, President, India Nivesh.
If the US budget talks face an absolute collapse and no resolution regarding automated kick-in of spending cuts and tax hikes to the tune of $600 billion is not arrived, the US would slip into a recession derailing the current recovery.
The resulting pile-up would not miss the wider world as well, analysts say.
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