Thursday, December 27, 2012

AJAX Financial : Oil Look To Fiscal Cliff



Crude oil and gold prices are at the mercy of US lawmakers as all eyes remain on Washington, DC in hopes of a deal to avoid the fast-approaching “fiscal cliff”.




The spotlight remains on Washington, DC as financial markets return from the Christmas holiday, where US policymakers have a mere five days left to deliver a deal avoiding the so-called “fiscal cliff”. The markets’ baseline scenario appears to call for a last-minute compromise that avoids an immediate fiscal shock but falls short of setting US public finances on a sustainable long-term path. The emergence of a loose framework for negotiating a “grand bargain” in the future also seems to be baked in.
While a watered-down accord is undeniably better for market-wide risk appetite than none at all, follow-through is likely to be limited to a short-term advance reflecting the dissipation of uncertainty. Indeed, with investors’ forecasts validated, the impetus for speculation evaporates. For commodities, this portends an uptick in cycle-sensitive crude oil and copper prices. Gold and silver may likewise find near-term support amid ebbing haven demand for the US Dollar.





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