Gold held steady below $1,700 an ounce on Friday, with prices heading for a third straight weekly fall amid uncertainty over stalled US budget negotiations to avert a fiscal crisis. US President Barack Obama and House of Representatives Speaker John Boehner met for 'frank' discussions on Thursday as frustration mounted over a stalemate in talks on the "fiscal cliff", a $600 billion package of tax hikes and spending cuts due early next year.
Investors were wary of taking positions while negotiations were ongoing, and as trading wound down ahead of the year-end. European shares were also little changed on Friday, while the euro eked out small gains against the dollar. Spot gold was little changed at $1,695.34 an ounce at 1324 GMT against $1,696.69 late on Thursday, headed for a 0.4-percent weekly drop. US gold was flat at $1,697.00.
Failure to reach agreement on handling the cliff could push the US economy into recession, but averting a crisis would likely benefit gold, which has traded closely with assets seen as higher risk, such as stocks, this year. "The assumption is that the politicians will reach a sensible resolution, which will help gold eventually," Standard Chartered analyst Daniel Smith said. "Gold may rally when equities do, but my experience is that gold will be a laggard."
But the metal took little support from the Federal Reserve's announcement this week that it will buy $45 billion of government bonds each month after its "Operation Twist" program expires, with many cashing in on brief price gains. Indian gold importers continued to stock up for the wedding season, taking advantage as prices were pressured by a stronger rupee.
"People feel this is a good buying opportunity as prices could jump another 1,000 rupees," said Harshad Ajmera, proprietor of bullion merchant JJ Gold House. From a technical perspective, analysts identify key resistance at gold's early December low of $1,684, at its November low at $1,670, and at $1,664, its 200-day moving average and a key retracement of its May-to-October rally. In other precious metals, spot palladium outperformed, rising 1 percent to $695.79, but was set to snap a six-week winning streak with a 0.5 percent week-on-week fall.
"Palladium... received a boost from China's manufacturing reading," Standard Bank said in a note, referring to data showing China's vast manufacturing sector expanded in December at its fastest pace in 14 months. Platinum was down 0.1 percent at $1,609.88 per ounce, and was headed for a 0.3 percent rise from the previous week. Spot silver was hardly changed at $32.46, rebounding from a near one-month low of $32.21 hit in the previous session. The metal was also headed for a third straight weekly fall, its longest slide in nearly seven months.
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