PRECIOUS-Gold ends flat, U.S. budget talks in focus

Thu Dec 20, 2012 3:15am IST

* Gold finds support after Tuesday's almost 2 percent drop
    * Selling eases as Obama threatens to veto Republican plan
    * Open interest up as prices slump, new bearish bets eyed
    * Coming up: U.S. GDP data, jobless claims Thursday


    By Frank Tang
    NEW YORK, Dec 19 (Reuters) - Gold steadied with little
overall change o n W ednesday, after dropping in the previous
session to a 3-1/2 month low, as U.S. legislators appeared far
from reaching deal to avert tax hikes and spending cuts which
could threaten to send the economy back to a recession.
    Rallies in crude oil and a weaker dollar also helped the
metal find a firmer footing after Tuesday's technical sell-off
triggered by growing hopes that U.S. legislators are closer to
reaching a deal that would avert a fiscal crisis next month.
    Selling pressure, however, dried up on Wednesday as progress
in talks in avoid a fiscal crisis appeared to stall. President
Barack Obama accused Republicans of digging in their heels due
to a personal grudge against him, while a Republican leader
called the president "irrational." 
    The uncertainty about the U.S. budget talks has dampened
investors' interest in gold. After Tuesday's sell-off, bullion
is on track to end the fourth quarter down almost 6 percent to
match its worst quarterly performance since the third quarter of
2008 at the height of the global economic crisis. 
    "The attraction of holding gold should wane as any agreement
that restores ... revenue increases and spending cuts over the
next 10 years would be an important step in getting the U.S.
fiscal house in order," said Edward Meir, metals analyst at
brokerage INTL FCStone.
    Spot gold inched up a penny at $1,669.55 an ounce by
3:39 p.m. EST (2039 GMT).
    U.S. COMEX gold futures for February settled down $3
cents an ounce to $1,667.70, with trading volume about 20
percent below its 30-day average, preliminary Reuters data
showed.
    Open interest, a gauge of market activity, surprisingly
climbed 4,000 lots to 435,742 contracts on Tuesday even though
bullion prices dropped 2 percent, suggesting newly created
bearish bets are weighing on gold prices, traders said.
    Silver dropped 1.5 percent to $31.16 an ounce.
   
    STRUGGLING WITH UNCERTAINTY
    Gold struggled to make headway amid uncertainty over the
budget negotiations on spending cuts of $600 billion and tax
hikes due next year which threaten to push the U.S. back into
recession.
    Year to date, gold is up around 7 percent and set for a 12th
straight year of growth, driven by rock-bottom interest rates,
concerns over the financial stability of the euro zone and
diversification into bullion by central banks.
    A 7 percent gain in gold this year would be well below an
average return of 16 percent over the past 12 years.
    Among other precious metals, platinum inched down 0.2
percent to $1,587.40 an ounce and palladium was up 0.8
percent at $692 per ounce.
    Underscoring prospect of a shortage, South Africa wants to
impose export curbs on minerals such as platinum and iron ore as
part of a drive by the government to create more jobs in
industry in the continent's biggest economy, a top official said
on Wednesday. 
    
 3:39 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1667.70  -3.00  -0.2  1664.20 1677.80  140,702
 US Silver MAR  31.116 -0.553  -1.7   31.075  31.870   41,621
 US Plat JAN   1592.90  -0.80  -0.1  1588.10 1602.90   13,258
 US Pall MAR    698.35   7.40   1.1   687.30  699.60    4,600
                                                               
 Gold          1669.55   0.01   0.0  1664.13 1676.61         
 Silver         31.160 -0.460  -1.5   31.060  31.780
 Platinum      1587.40  -3.60  -0.2  1592.00 1604.20
 Palladium      692.00   5.50   0.8   689.00  696.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        156,153   184,787   174,396     12.98   -0.12
 US Silver       45,741    59,658    52,585      22.2    1.55
 US Platinum     19,120    10,067     8,902     17.86   -0.55
 US Palladium     4,602     6,238     4,737
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