Gold traded flat on Friday, but notched its largest weekly gain since late August as a looming US fiscal crisis led to purchases of the metal as a hedge against economic uncertainty. The metal has gained over 3 percent this week as investors turned their focus from the election to the US "fiscal cliff", a combination of government spending cuts and tax increases due to be implemented under existing law in early 2013.
Such measures could send the US economy back into recession, economists say.
--- Gold hits technical resistance near 50-day moving average "Gold is again acting as the haven as ... the fiscal cliff looms, and euro zone woes increase. More gold buyers are initiating positions going forward," said George Gero, vice president at RBC Capital Markets.
The metal erased early gains on Friday after US President Barack Obama's insisted that tax hike for the very rich must be part of the bargain to prevent a fiscal crisis, as some investors worried such tax increase would hurt the overall economy. Obama also invited Congressional leaders to start negotiating to avert the crisis and said he was "open to compromise". Spot gold was up 0.1 percent at $1,731.09 an ounce by 4:05 pm EST (2105 GMT), after touching a three-week peak of $1,738.66.
On charts, gold appeared to run into strong technical resistance just below its 50-day moving average near $1,740. Gold's 3.2 percent gain this week is its biggest weekly rise in 11 weeks since the last week of August. US COMEX gold futures for December settled up $4.90 at $1,730.90 an ounce, with trading volume about 10 percent below its 250-day average, preliminary Reuters data showed.
Better US consumer sentiment and a steadier performance on Wall Street after sharp declines in stock prices earlier this week also boosted gold buying. Hopes of stronger Chinese demand for gold after data showed economic recovery and mild inflation, coupled with signs of better Indian physical demand, provided additional support. Silver gained 0.7 percent to $32.55 an ounce. China's economy strode further along the road of recovery from its slowest growth in three years, data for October showed.
Friday's data, key barometers of domestic activity and output from China's export-oriented factory sector, offered further evidence that policy loosening had worked and had left the authorities with room to do more if necessary. China's gold demand is expected to grow by 1 percent this year to a record of around 860 tonnes, Philip Klapwijk, the global head of metals at consultancy Thomson Reuters GFMS, said this week, with jewellery and investment sales rising.
Gold importers in India, the world's biggest buyer of bullion, are expected to make purchases ahead of the Hindu festivals of Dhanteras and Diwali, major gold-buying events, next week. Analysts said physical demand usually rises during the Indian wedding season, which continues until December. Among platinum group metals, platinum was up 0.9 percent at $1,554.75 an ounce. Spot palladium fell 1.4 percent to $603.47 an ounce.
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