PRECIOUS-Gold up but off highs, post-election fiscal crisis eyed

Wed Nov 7, 2012 3:55pm EST

Related Topics

* Heavy sell-offs in U.S. equities, crude weighs
    * Attention shifts to resolving U.S. "fiscal cliff"
    * Early rally on Obama win, more economic stimulus fizzles
    * Coming up: U.S. international trade, jobless claims
Thursday


    By Frank Tang
    NEW YORK, Nov 7 (Reuters) - Gold pared gains on Wednesday 
ending slightly higher, after d eclines i n e quities and crude o il
knocked bullion off its high, as investors zeroed in on a
looming U.S. fiscal crisis following the re-election of
President Barack Obama.
    Earlier in the day, bullion rose nearly 1 percent as Obama's
victory fuelled speculation that four more years of a Democrat
in the White House would contribute to an extension of the
Federal Reserve's easy monetary policy.
    Gold's rally later fizzled as a sell-off on Wall Street
deepened worries over the "fiscal cliff," a $600 billion package
of tax increases and spending cuts to take effect automatically
at the end of 2012, a scenario that could severely strain the
economy. 
    "The re-election of President Barack Obama means we are
turning our focus back to the fiscal cliff, and the uncertainty
of U.S. policies can send gold in either direction," said
Jeffrey Sherman, commodities portfolio manager of DoubleLine
Capital LP, which manages more than $45 billion in assets.
    Worries about deflationary forces due to the fiscal crisis
could weigh on gold. However, huge economic uncertainty related
to the country's fiscal accounts in 2011 had boosted safe-haven
demand and sent gold to a record high.
    Spot gold was up 0.2 percent at $1,71 9 . 51 an ounce by
3:18 PM ES T (2 051 GMT), after hitting a session low at
$1,703.80, which was nearly $30 below an earlier high of
$1,731.40.
    U.S. gold futures for December delivery settled down
$1 at $1,714 an ounce.
    T rading volume was at a strong 270,000 lots, or 53 percent
above its 250-day average, and set to finish at its h ighest in
about 2 months, preliminary Reuters data showed.    
    
    FISCAL CRISIS EYED
    A split Congress will keep open the likelihood of messy
negotiations to avert the fiscal crisis that risks pushing the
economy into deep recession.
    Gold was hit by heavy liquidation pressure from outside
markets w hich were pummelled by economic fears. The S&P 500
index fell over 2 percent to drop below 1,400 points for
the first time in more than two months, and U.S. crude futures
 tumbled 4.5 percent.  
    Andrew Cole, fund manager with Baring Asset Management,
said: "I think people would be less inclined to own U.S. stocks
and bonds in an event where they don't know how policy will be
fixed."
    However, he saw an eventual return to more tolerance of
risk, which would see gold weaken. 
    Other precious metals also tracked the boarder markets to
reverse earlier gains.
    Silver edged down 0 . 3 percent to $31. 87 an ounce.
A mong platinum group metals, pl atinum was down 0.6 
p ercent at $1,540. 2 4 , while palladium fell 0. 7 p ercent to
$609.5 0 . 
    
 3:18 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1714.00  -1.00  -0.1  1703.00 1733.00  240,468
 US Silver DEC  31.661 -0.373  -1.2   31.215  32.420   62,619
 US Plat JAN   1539.50 -18.80  -1.2  1534.50 1569.90   10,515
 US Pall DEC    610.35  -9.80  -1.6   602.60  625.15    4,195
                                                              
 Gold          1719.51   4.17   0.2  1703.80 1731.40         
 Silver         31.870 -0.080  -0.3   31.250  32.400
 Platinum      1540.24  -9.75  -0.6  1537.25 1564.25
 Palladium      609.50  -4.10  -0.7   606.02  622.50
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        270,101   147,521   176,015     16.37   -0.38
 US Silver       73,108    40,861    55,593     27.87    1.99
 US Platinum     10,721    10,790     9,378     19.23    0.03
 US Palladium     4,449     3,337     4,466
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