Gold edged up on Monday after posting its biggest weekly gain since late August on safe-haven buying, driven by worries the United States could return to recession if Congress fails to reach a deficit-reduction deal. President Barack Obama has invited congressional leaders to the White House to start negotiating a deal to prevent sharp tax hikes and spending cuts from going into effect at the end of the year and said he was open to compromise.
Gold added $1.88 an ounce to $1,732.79 by 0239 GMT, holding near a 3-week high around $1,738 struck on Friday and hovering well above a 2-month low around $1,672 hit last week.
Worries about the fiscal cliff continue to drive sentiment. Obama will speak on Wednesday on the matter, and we are seeing some signs of compromise between Democrats and Republicans, said Nick Trevethan, senior metals strategist at ANZ in Singapore.
That may take some of the steam out of the upside story for gold, but the prospect of negative real interest rates and longer-term inflationary risks remain positives for bullion.
Uncertainty over U.S. fiscal woes weighed on shares in Asia but euro held above a two-month low after Greece's ruling coalition secured enough votes in parliament to approve the 2013 budget law. A rebound in the euro makes dollar-priced gold less expensive.
We continue to see upside potential in this market with $1,750 the next target, said Trevethan.
Above there, gold is likely to struggle with very heavy resistance at $1,790-$1,800, and we do not expect the market to break above those levels on a sustained level until next year.
U.S. gold for December rose $2.30 an ounce to $1,733.20.
At the London Bullion Market Association conference in Hong Kong, president of the Shanghai Gold Exchange told Reuters the bourse will launch an interbank market early next month that will start with spot contracts and gradually offer forward contracts.
Also at the same conference, general director of the People's Bank of China, Xie Duo, said the central bank has not set a time frame on