Gold eases but on track for first weekly gain this month

SINGAPORE Fri Dec 28, 2012 1:25pm IST

An employee holds an unpressed gold Combibar at a plant of gold refiner and bar manufacturer Valcambi SA in the southern Swiss town of Balerna December 20, 2012. REUTERS/Michael Buholzer

An employee holds an unpressed gold Combibar at a plant of gold refiner and bar manufacturer Valcambi SA in the southern Swiss town of Balerna December 20, 2012.

Credit: Reuters/Michael Buholzer

Related Topics

SINGAPORE (Reuters) - Gold gave up early gains and ticked down on Friday ahead of talks to prevent the United States from plunging off a "fiscal cliff" of tax increases and spending cuts, but prices remained on track for their first weekly gain in a month.

Failure to clinch a deal in the U.S. would likely spur safe-haven buying of bullion, but since many investors have both equities and gold in their portfolios, the metal may also track stock markets higher if the White House and Congress finally reach an agreement.

Gold fell $1.58 to $1,661.71 an ounce by 0649 GMT after rising to as high as $1,665.99. For the year, gold is up around 6 percent, but well below a record of around $1,920 hit in September 2011, when a worsening debt crisis in Europe sparked a buying rush.

"We do expect a ... deal to happen at the last minute, but it will be a minimal deal," said Dominic Schnider, an analyst at UBS Wealth Management in Singapore. "I think that should be gold supportive."

President Barack Obama will meet congressional leaders at the White House on Friday to try to revive negotiations to avoid tax hikes and spending cuts - together worth $600 billion - that will begin to take effect on January 1.

Even a partial agreement on taxes that would leave tougher issues like entitlement reform and the debt ceiling until later could be enough to keep markets calm.

U.S. gold for February eased $1.20 an ounce to $1,662.50.

In other markets, the yen fell to its lowest level in more than two years on Friday, lifting Japanese stocks to 21-month highs on expectations of drastic monetary easing, while shares in the rest of Asia rose as Washington races to avoid a fiscal crisis.

The euro held steady against the dollar at $1.3243 with investors waiting to see whether a last-chance round of U.S. budget talks will achieve a deal.

Gold is traditionally a safe-haven and inflation hedge that investors rush to in times of trouble, but it has lately behaved like any risk asset. The precious metal sometimes rises and falls with the stock market and even follows movements of the dollar.

Gold is heading for a 12th straight year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks.

Global gold demand in 2013 should be led by further strength in Chinese demand and a recovery in India, helping the precious metal continue its bull run into its 13th year, the industry-backed World Gold Council has said.

Premiums for gold bars were unchanged in Singapore at $1.0 to $1.20 an ounce to spot London prices.

"Of course there's some buying but you don't see heavy activity. Indonesia is pretty quiet, which is partly because there are not many stocks available in the market," said a physical dealer in Singapore.

"India hasn't been very active for some time," said the dealer, referring to the world's main gold consumer.

(Editing by Joseph Radford and 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

REUTERS SHOWCASE

Coal Block Allocation

Coal Block Allocation

Government urges Supreme Court to not cancel some 'illegal' coal mines  Full Article 

Modi in Japan

Modi in Japan

Japan and India agree to boost strategic ties at summit  Full Article 

Basel III Norms

Basel III Norms

RBI amends Basel III guidelines for banks  Full Article 

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Current Account

Current Account

Balance of payments surplus for third straight quarter  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Managing Share Sales

Managing Share Sales

Govt seeks bids from banks to manage PFC, REC share sales   Full Article 

Reuters India Mobile

Reuters India Mobile

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