A proposal from a Republican leader to extract concessions from US President Barack Obama to head off the fiscal cliff $600 billion in tax hikes and spending cuts starting Januaryfailed to gather support from his own party on Thursday. This led to uncertainties about possible action by the US to prevent its economy from slipping back into recession, and also jeopardised any raw material demand prospects.
A string of worse-than-expected data from debt-hit eurozone German consumer confidence crashed to its lowest in more than a year, the UK revised down its growth figures and Sweden, too, trimmed its economic forecasts just added to the gloom pervading the global economy.
Gold headed for its sharpest weekly loss since June, although the precious metal looks set for a twelfth straight annual rise, thanks to rock-bottom interest rates, concerns over the financial stability of the eurozone and diversification into bullion by central banks around the world.
Bullion was trading at $1,645.17 per ounce by 1100 GMT after hitting a low of $1,635.24, slightly higher than the four-month low of $1,635.09 hit on Thursday.
US February gold futures stayed flat at $1,646.40 an ounce after hitting a low around $1,636, as the euro weakened against the dollar. The euro, which has been tracked closely by gold in recent months, retreated further from an eight-and-a-half-month high hit earlier in the week to stand at $1.3214. Both spot gold and futures are poised for a fourth straight weekly drop.
Brent crude crashed by $1.05 to $109.15 intraday, although it still remained well on course for a second weekly rise, thanks to gains earlier in the week.
The commodity is up nearly 2% so far this year, having averaged around $111.70 a barrel, compared with the 2011 average of $110.91. The US crude fell sharper, responding to the fiscal crisis, and shed $1.45 to $88.68 a barrel.
However, copper gained mainly on hopes of green shoots in the economy of China, the metals biggest consumer, although the US budget crisis capped gains.
Three-month copper on the London Metal Exchange (LME) was at $7,790 a tonne intraday, compared with a three-week intraday low of $7,735 hit on Thursday. Since a price rise of nearly 8% from mid-November to an around two-month high on December 12, the momentum has started to fade, analysts are of the opinion. The metal has gained 2.4% so far this year.
Grains futures, too, rebounded from lows, with Chicago Board Of Trade January soybeans advancing 0.76% to $14.19-1/2 a bushel after falling 2.09% in the previous session.
Soybeans are down about 5% this week due to falling demand from top buyer China.