Gold struggles to break $1,700, US fiscal talks eyed
Gold struggled to break resistance at $1,700 an ounce on Tuesday, with many investors stood on the sidelines in the penultimate week of the year, watching U.S. lawmakers inch towards a deal to avert fiscal calamity.
In a fresh offer to resolve the standoff on talks on the "fiscal cliff" – $600 billion worth of tax hikes and spending cuts to kick off in the new year, President Barack Obama is seeking $1.2 trillion from higher tax revenues and is willing to agree to $1.22 trillion in spending cuts.
Analysts had expected a resolution to the problem to take some safe-haven appeal off gold, though failure to ink a deal would trigger a broad sell-off in financial markets on fear of another recession, which could drag gold down.
But the backdrop of easy monetary policy from the U.S. Federal Reserve and other central banks should provide support, as investors worried about currency debasement and rising inflation flee to hard assets including gold.
"Risk appetite has been improving lately and that has dampened interest in gold," said Li Ning, an analyst at Shanghai CIFCO Futures.
"The $1,700 level is key resistance, but there isn't much room on the downside as investors remain confident in gold's outlook."
Li said that stable holdings in gold-backed exchange-traded funds showed investor interest remained.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, inched down to 1,350.519 tonnes on Dec 17, but still held near a record high of 1,353.346 tonnes
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