Gold flat as U.S. fiscal worries support dollar

SINGAPORE Thu Nov 8, 2012 1:30pm IST

A worker stands at his gold jewellery shop at the market of Khan el-Khalili in Old Cairo October 10, 2012. REUTERS/Amr Abdallah Dalsh/Files

A worker stands at his gold jewellery shop at the market of Khan el-Khalili in Old Cairo October 10, 2012.

Credit: Reuters/Amr Abdallah Dalsh/Files

Related Topics

Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

SINGAPORE (Reuters) - Gold traded little changed on Thursday below the 2-1/2-week high hit in the previous session after U.S. President Barack Obama was re-elected, as a strong dollar largely put off buyers.

Obama's re-election gave markets a boost by ending weeks of political uncertainty, but now investors have shifted their focus to the "fiscal cliff" looming over the world's biggest economy: nearly $600 billion tax hikes and spending cuts which, if left unchanged, will begin in early 2013 and possibly push the fragile U.S. economy into deep recession.

Worries about the fiscal cliff are supportive of safe-haven gold, but a strong dollar, which hit a two-month high against a basket of major currencies in the previous session, curbed bullion's gains by making it more expensive for buyers holding other currencies.

"The dollar serves as a barometer of overall global risk," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

"Now the global risk has moved to centre on the U.S. and what it means for that barometer becomes a little messy and hard to tell. The dollar should weaken as the Fed offsets any slowdown, which I expect to be the end result, but in the near term if the market is nervous, it will bid up the dollar."

Spot gold was little changed at $1,717.79 an ounce by 0742 GMT, after rising to a 2-1/2 week high of $1,731.40 in the previous session.

U.S. gold inched up 0.3 percent to $1,718.30.

Technical analysis suggested that spot gold looks neutral in the range of $1,702-$1,734 an ounce during the day, said Reuters market analyst Wang Tao.

Investors are now awaiting results of a European Central Bank policy meeting. The bank is expected to leave interest rates unchanged, even as the latest data showed a slowdown in Germany's manufacturing sector.

The lingering euro zone debt crisis and worries about the U.S. fiscal problems kept investors interested in gold.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 1,337.205 tonnes by November 7, its second-highest level after the all-time high of 1,340.521 tonnes hit in early October.

But buying slowed in Asia's physical gold market, as prices have risen more than 2 percent this week.

"No one is buying at this level, as people have bought a lot when prices dipped below $1,700," a Hong Kong-based gold dealer said.

(Editing by Himani Sarkar)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

REUTERS SHOWCASE

Asian Markets

Asian Markets

Asian stocks flat after China PMI meets expectations  Full Article 

Chinese Economy

Chinese Economy

Factory activity shrinks for 4th month; pace of decline slows   Full Article 

International Gold

International Gold

Gold hovers near 2-1/2 month lows on firm equities, fund outflows  Full Article 

GM Lawsuit

GM Lawsuit

GM seeks U.S. court protection against ignition lawsuits  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage