Gold on track for best weekly gain since November

Dec 28 2012, 09:27 IST
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For the year, gold is up around 6 percent, but well below a record of around $1,920 hit in September 2011. (Reuters) For the year, gold is up around 6 percent, but well below a record of around $1,920 hit in September 2011. (Reuters)
SummaryFor the year, gold is up around 6 percent, but well below a record of around $1,920 hit in September 2011.

Gold firmed for a fifth straight day on Friday, ahead of talks to prevent the United States from plunging off a "fiscal cliff" of tax increases and spending cuts, with the metal on track for its biggest weekly gain in a month.

Failure to clinch a deal in the U.S. would likely spur safe-haven buying of bullion, but since many investors have both equities and gold in their portfolios, the metal may also track stock markets higher if the White House and Congress finally reach agreement.

Gold was little changed at $1,663.56 an ounce by 0311 GMT in thin trade. For the year, gold is up around 6 percent, but well below a record of around $1,920 hit in September 2011, when a worsening debt crisis in Europe sparked a rush of buying. "We do expect a ... deal to happen at the last minute, but it will be a minimal deal," said Dominic Schnider, an analyst at UBS Wealth Management in Singapore. "I think that should be gold supportive."

President Barack Obama will meet congressional leaders at the White House on Friday to try to revive negotiations to avoid tax hikes and spending cuts – together worth $600 billion – that will begin to take effect on Jan.1

Even a partial agreement on taxes that would leave tougher issues like entitlement reform and the debt ceiling until later could be enough to keep markets calm.

U.S. gold for February was also little changed at $1,664.40 an ounce.

In other markets, the yen hit its lowest level in more than two years on expectations of drastic monetary easing in Japan, while shares were capped by worries over the fiscal cliff.

The dollar slipped slightly against the euro ahead of weekend budget talks in Washington.

Gold is traditionally a safe-haven and inflation hedge that investors rush to in times of trouble, but it has lately behaved like any risk asset. The precious metal sometimes rises and falls with the stock market and even follows movements of the dollar.

Gold is heading for a 12th straight year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks.

Global gold demand in 2013 should be led by further strength in Chinese demand and a recovery

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