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. Investors were wary of taking positions while negotiations were ongoing, and as trading wound down ahead of the year-end.
"Sentiment in gold seems to be changing. Gold seems to be becoming less risk-averse," said Eugen Weinberg, global head of commodities research at Germany's Commerzbank. Spot gold was little changed at $1,693.00 an ounce at 1541 GMT against $1,696.69 late on Thursday, headed for a 0.6-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." Stimulus measures from central banks, which have kept up pressure on long-term interest rates while fuelling inflation concerns, have put gold on track for a 12th year of gains.
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. "Despite the Fed's implementation of QE4, the (precious metals) market remains focused on the potential adverse liquidity impact of the US fiscal cliff," Deutsche Bank said in a note on Friday.
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 1.29 percent to $697.9, but was set to snap a six-week winning streak with a 0.5 percent week-on-week fall.
Platinum was down 0.09 percent at $1,610.00 per ounce, and was headed for a 0.3 percent rise from the previous week. Spot silver was down 0.25 percent at $32.43, recovering 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.