Gold rises with stocks on optimism over U.S. fiscal cliff

LONDON Thu Nov 29, 2012 8:21pm IST

An employee from Bulgaria's largest zinc and lead smelter, KCM, displays a 100 g gold plate and a 13 kg gold bullion near the city of Plovdiv October 20, 2011. REUTERS/Stoyan Nenov/Files

An employee from Bulgaria's largest zinc and lead smelter, KCM, displays a 100 g gold plate and a 13 kg gold bullion near the city of Plovdiv October 20, 2011.

Credit: Reuters/Stoyan Nenov/Files

Related Topics

LONDON (Reuters) - Gold prices firmed on Thursday in line with stocks and other commodities, further retracing the previous day's sharp fall, as renewed optimism that a deal will be reached to resolve the U.S. fiscal crisis boosted appetite for assets seen as higher risk.

World shares hit three-week highs and commodities rose after House of Representatives Speaker John Boehner voiced optimism that Republicans could broker a deal with the White House to avoid a $600 billion crunch of spending cuts and tax hikes dubbed the "fiscal cliff".

U.S. stock index futures held gains and the dollar stayed under pressure after data showed weekly initial jobless claims fell for a second consecutive week and the economy grew faster than initially thought in the third quarter.

The implications of the fiscal cliff for gold are unclear. Protracted talks, which could heighten risk aversion, may be positive if they spark buying of the metal as a haven from risk, but in the short term, hopes for a quick resolution are benefiting gold as it keeps pace with stocks.

"It could be positive for gold whichever way the negotiations go, but a rally on a speedy resolution might be quite a short-term positive, whereas any risk of prolonged sovereign stress could be a longer-lasting positive," the Economist Intelligence Unit's Caroline Bain told the Reuters Global Gold Forum on Thursday.

"We think (a quick resolution) is more likely," she said. "Obama has a clear mandate, and there are signs that the Republicans will be less obstructive, at least initially. The Democrats need to seize the moment of relative weakness to hurry through a deal."

Spot gold was up 0.3 percent at $1,724.50 an ounce at 1402 GMT, after tumbling 1.3 percent in the previous session due to a heavy bout of stop-loss selling. U.S. gold was up$8.10 an ounce to $1,724.60.

UBS said in a daily market note that despite the selling on Wednesday, it had observed little client appetite to follow the trend, suggesting that gold remained well supported.

"We don't think anything has materially changed for gold," it said. "Essentially the metal is back to where it was trading last week. This is another test of downside buying interest but it also highlights the commitment issues that reside when the market attempts to climb higher."


Gold support $1,720:

2012 asset returns:

2012 commod returns:

Gold/USD correlation:

Gold/silver ratio:


Gold prices found good support at $1,720 an ounce, a key retracement of the decline from its October high of $1,795.69 an ounce to its November low at $1,672.24, and the location of its 30-day moving average.

"Gold broke below the ascending channel which had been developing since early November (at) 1737/35," Societe Generale said in a note. "(Key support level) $1,703 is the 61.8 percent retracement of the recovery from 1672 to 1754, as well as the lows of early/mid-November."

Dealers said cheaper gold prices after the technically driven sell-off on Wednesday augured well for increased buying of physical metal.

Gold importers in India, the world's biggest buyer of the metal, sprang back in action, accumulating stocks in small quantities, as prices fell to hit their lowest in nearly two weeks.

Holdings of the SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, hit a record high for a second consecutive day, underlying buoyant investment interest.

Its holdings stood at 1,347.018 tonnes on November 28, up nearly 11 tonnes so far this month and on course for its fourth month of straight gains.

Spot silver was up 0.5 percent at $33.91, while the gold-silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, stood at 51.1, hovering above a two-month low.

Spot platinum was up 0.7 percent to $1,617, and palladium was up 1.5 percent at $681.

(Editing by James Jukwey and Keiron Henderson)

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

  • Most Popular
  • Most Shared

Shares Hit Record

Sensex, Nifty rise to second consecutive record high

Sensex surges 500 points on BOJ easing, L&T gains

The BSE Sensex and Nifty surged to record highs for a second consecutive session on Friday after Bank of Japan's surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips such as Larsen & Toubro.  Full Article 


Wilful Negligence?

Wilful Negligence?

SEBI piles pressure on Sahara to sell overseas hotels  Full Article 

Indian Economy

Indian Economy

India's fiscal deficit in H1 almost 83 pct of full-year target.  Full Article 

M&M Earnings

M&M Earnings

M&M Q2 net profit down 4 percent, hit by poor monsoon.  Full Article 

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 



Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Reuters India Mobile

Reuters India Mobile

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