PRECIOUS-Gold near flat pre-Christmas; fiscal cliff in focus

Tue Dec 25, 2012 1:50am IST

Related Topics

* Spot gold edges higher, futures a touch lower

* Focus on fiscal cliff, views on gold impact differ (Recasts and updates throughout to close of U.S. futures trading)

By Barani Krishnan and David Brough

NEW YORK/LONDON, Dec 24 (Reuters) - Gold was barely changed in Monday's pre-Christmas session, with futures ending down a notch amid light volume and uncertainty over America's fiscal condition in the coming year.

Most commodities, including oil and copper, ended lower as the U.S. Congress drifted without a solution toward the new year after a Republican plan to avert debilitating tax hikes and spending cuts failed to gain ground last week.

The dollar, which often moves in the opposite direction of commodities, edged higher by 2:00 p.m. EST (1900 GMT), erasing losses in the euro.

"Given the condition of other markets and the relative strength of the dollar, gold is doing pretty fine," said James Dailey, portfolio manager at TEAM Financial Asset Management in Pennsylvania.

QUIET MARKET

The spot price of gold stood at $1,656.99 an ounce, versus late Friday's level of $1,656.61.

The spot price could test support at $1,631, as it may have completed a rebound from a Dec. 20 low of $1,635.09, Reuters market analyst Wang Tao said.

In gold futures, the benchmark February contract in New York settled down 60 cents at $1,659.50.

Volume in gold futures was less than a quarter of the 30-day norm, with metals markets on New York's COMEX closing earlier than usual for Tuesday's Christmas Day holiday.

Gold has been in both risk-on and risk-off modes lately, with investors undecided about direction for the precious metal due to the so-called U.S. "fiscal cliff."

Traditionally a safe-haven for investors when other commodities and risk assets are down, bullion has bucked that trend in recent weeks and moved in tandem with the dollar.

Some analysts say an impasse in the U.S. budget talks boosts gold's safe-haven appeal. Others argue that the metal is increasingly behaving like a risk asset, which is why a budget deal could offer investors some direction.

POSITIVE VIEW

Peter Fertig, analyst with Quantitative Commodity Research in London, said he believed the fiscal cliff will be avoided "at the last minute" and gold will benefit from that.

"The weaker dollar and steady stock markets are giving support to gold. Gold has key support around last week's low of $1,635, with resistance around $1,675, near the lows touched in early November," Fertig said.

Dailey of TEAM Financial said gold is likely to turn into a safe-haven again next year as the United States appeared on course to another credit rating downgrade after Standard & Poors cut the country's "AAA" rating to "AA" in Aug 2011. Fitch Ratings said last week it could issue a U.S. downgrade if the Dec. 31 deadline for resolving the fiscal cliff is not met.

"None of the budget proposals being put forward now is bringing the U.S. any closer to fulfilling the requirements of the credit rating agencies; so another downgrade is almost certain even if we get past the fiscal cliff, and that should be good for gold," Dailey said.

Since the turn of the century, gold has experienced one of the longest bull runs in a commodity, with bullion prices set for a 12th straight year of gains.

Much of this year's gains were aided by ultra-loose monetary policy by the world's leading economies, bullion buying by central banks trying to diversify foreign reserves and concerns over the financial stability of the euro zone.

Physical demand for gold has also been strong recently, with No. 1 buyer India scrambling to purchase limited stocks available from local banks after most overseas sellers left for the Christmas vacation.

Even so, hedge funds and money managers slashed their net long positions in gold futures during the week to Dec. 18 to their lowest level since the end of August, according to the Commodity Futures Trading Commission's Commitments of Traders report issued on Friday.

Among other precious metals, silver was down 0.3 percent at $29.88 an ounce, platinum slipped 0.3 percent to $1,529.50 and sister metal palladium rose nearly 1 percent to $683.13. (Reporting by Barani Krishnan and David Brough; Additional reporting by Lewa Pardomuan in Singapore: Editing by Veronica Brown, Keiron Henderson and Jim Marshall)

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

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 

REUTERS SHOWCASE

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 

Commodities

Commodities

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