PRECIOUS-Gold tracks equities lower, eyes on Middle East
* Gold to drop to $1,702.59-technicals * Coming Up: U.S. Weekly jobless claims; 1330 GMT (Adds prices, WGC's Q3 demand figures) By Lewa Pardomuan SINGAPORE, Nov 15 (Reuters) - Gold slipped on Thursday as share prices fell, but tensions in the Middle East and worries about the U.S. "fiscal cliff" are expected to boost the metal's safe-haven appeal and spur buying from investors. The so-called fiscal cliff - a combination of government spending cuts and tax rises due to go into effect in early 2013 unless Congress acts - could reduce the U.S. budget deficit but may also tip the economy back into recession. Gold fell $3.01 an ounce to $1.723.04 by 0701 GMT. It rallied to a three-week peak of around $1,738 on Friday, when investors bought the metal on expectations U.S. monetary policy will remain loose after President Barack Obama's re-election. "I'd rather look at the upside than the downside. I think people are basically bullish," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo, citing hopes the United States will sustain its quantitative easing strategy. U.S. gold for December lost $6.60 an ounce to $1,723.50. Global gold demand dropped 11 percent in the three months to September from record levels seen in the same period last year, dampened mainly by fading Chinese fervour as its economy slowed, with stronger Indian demand stemming a larger fall, the World Gold Council said. However, bullion demand to back gold exchange-traded funds - which issue securities backed by physical metal - jumped to 136 tonnes in the third quarter from 87.4 tonnes a year ago. "Against a backdrop of continued global economic uncertainty and elections in China and the U.S., it is clear from five-year rising demand trends that gold's fundamental property as a vehicle for capital preservation continues to endure...," said managing director of investment research Marcus Grubb. China's president-in-waiting Xi Jinping won a strong mandate on Thursday to lead the world's No.2 economy and deal with problems ranging from corruption to economic uncertainty. In other markets, the euro rebounded from a 2-month low on Thursday, while stocks mostly fell as investors reacted to the prospect of drawn-out negotiations over the looming U.S. financial crisis. Obama said on Wednesday that Republicans would have to agree to raise taxes on the wealthy as the first step in a budget deal that would prevent a dysfunctional Washington from pushing the economy into recession. Gold sometimes tracks stock markets as a drop in equities prompts investors to sell bullion to cover losses. Bullion, however, found some support as tensions in the Middle East escalated after Israeli strikes against the Gaza Strip. Brent oil prices were steady above $109 per barrel. "I think sentiment is still bullish because of the tension in the Middle East and also the fiscal cliff. I think the market is looking to touch $1,750, while the downside is $1,720," said a dealer in Hong Kong. "I don't think we are going to break $1,700, unless of course there's a strong rally in the dollar." The U.N. Security Council will hold a closed emergency meeting on Wednesday night to discuss Israeli strikes against the Gaza Strip as Israel threatened a wider offensive in the Palestinian enclave to stem rocket salvoes by Hamas militants. Participants in an annual gathering of the London Bullion Metal Association on Tuesday expected gold to reach $1,843 an ounce by September 2013, and forecast silver to reach $38.40. Precious metals prices 0701 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1723.04 -3.01 -0.17 10.18 Spot Silver 32.58 -0.07 -0.21 17.66 Spot Platinum 1577.00 -5.99 -0.38 13.21 Spot Palladium 629.47 -3.93 -0.62 -3.53 COMEX GOLD DEC2 1723.50 -6.60 -0.38 10.00 13165 COMEX SILVER DEC2 32.59 -0.29 -0.88 16.75 3460 Euro/Dollar 1.2741 Dollar/Yen 80.77 COMEX gold and silver contracts show the most active months (Editing by Miral Fahmy and Himani Sarkar)
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