Fiscal Cliff talks getting very discouraging for the Commodities

We have been discussing since long about the fiscal cliff getting persistent in the United States of America. The government has been working very hard for the recovery but the exact solution has not been found yet which has developed as a challenge not only for the Americans but also for the other parts of the world working as trade partners with USA. Up till now the government had been consoling many investors about the planned recovery strategy but it did not happen as expected and the investors have started losing hopes. The lawmakers in the USA have not reached to an agreement to prevent more than $600 billion in automatic tax increases and the spending cuts. Moreover, Europe has also cut its growth outlook.

There are instances seen where the speculators and the major money managers have decreased their net long positions by up to 3.4 percent. The holdings of gold has fell by 25 percent which is the biggest drop seen since March which was forecasted to peak very well rather. Besides that, wheat contracts also fell twice in the three weeks. The S & P GSCI also dropped by 2.6 percent, the main reason for which was the failure of the government to tackle the fiscal cliff. Another very bad news hitting the market is the statement by the European Central Bank which has anticipated the economic contraction rather than the expansion. And they have also said that the region won’t see significant emergence from the dump it has been facing until the second half of 2013. The monetary authorities in the USA are planning for the selloff of the treasury instruments to balance the economy and to make the general public faithful about the recovery strategy.

There is a whim of bad news on the floor also adding up that the confidence of the US consumers have fallen down more than the expectation; fallen down to a four-month low and people have started assuming that their taxes may, for obvious reasons, increase. The prolonging fiscal cliff has slammed every bit of optimism in the public. Not very long back the people in the USA went through the recession and the present scenario shows that if the lawmakers cannot exactly resolve the issue, one more recession will definitely come!

German industrial production has unexpectedly dropped followed by most of the industrial production in the Europe and these only sign the upcoming contraction, a discouraging contraction, in the commodity market also.