Gold saw another "China Bomb" overnight at a point of very light trading, allowing it to trip stops and snowball a large drop in gold prices. Some Indian gold importers, who have been hurt by the weak rupee boosting gold prices for them, took advantage of the situation, but could not dent the volume on the sell side. Spot gold was under $1,695/oz on the COMEX open.
Markets worldwide are softer on nervousness over political brinkmanship in the U.S. fiscal cliff negotiations. Early economic data released today shows first-time jobless claims down ~29,000 to 343,000 - better than expected. Retail sales were good, mainly on the backs of electronics and auto sales (Sandy replacements?) The dollar is slightly up, and oil slightly down, adding to pressure on precious metals.
With the new "Evans Rule" driving the Fed's quantitative easing policy, the price of gold now has schizophrenic forces acting on it. Economic improvement increases the risk of inflation, but if unemployment drops before inflation rises, money-printing by the Fed might stop with little warning. However, if Bernanke is still at the helm, his vow to "keep the pedal to the metal" to make sure the expansion sticks would give gold more time to react than it may have if someone else is calling the shots in the FOMC.