PRECIOUS-Gold edges up; U.S. fiscal uncertainty caps gains

Mon Dec 3, 2012 3:04am EST

* Euro rises to six-week high vs. dollar
    * Spot gold stuck in $1,705.46-$1,730 range -technicals
    * Coming Up: Euro zone Markit Mfg PMI, Nov; 0858 GMT

 (Updates prices)
    By Rujun Shen
    SINGAPORE, Dec 3 (Reuters) - Gold posted minor gains on
Monday on strength in the euro, but uncertainty about the U.S.
budget talks kept bullion's advances in check.
    Underscoring investors' interest in the metal, holdings of
gold-backed exchange-traded funds hit a record
high and speculators raised their net length in gold for the
third straight week. 
    The euro rose to a six-week high versus the dollar after
upbeat China manufacturing data helped trigger stop-loss buying,
and the dollar index dropped to a one-month low, making
commodities priced in the greenback more attractive for buyers
holding other currencies.  
    But the dragging negotiations in Washington to avert the
"fiscal cliff", $600 billion worth of tax increases and spending
cuts scheduled to roll in automatically in early 2013 that
threaten to push the world's largest economy back into
recession, kept investors on tenterhooks. 
    "People are more cautious because there is no clear sign
when the fiscal cliff will be solved," said Brian Lan, Managing
Director of GoldSilver Central Pte in Singapore, adding that
gold was likely to trade in the range of $1,700 and $1,750
before the market saw any clarity in the budget talks.
    But gold could also gain from this uncertainty in the long
term as Washington is likely reach a compromise, rather than a
perfect solution, with the deadline drawing near - leading to
expectations of more help on the monetary side from the central
bank, analysts said. Monetary easing has been a main driver of
gold prices in recent years.
    "From what we've seen, it is not going to be easy to push
through an agreement, which will be good for precious metals,"
Lan said.
    Spot gold inched up 0.2 percent to $1,718.90 an ounce
by 0725 GMT, after dropping a slight 0.3 percent in November.
U.S. gold gained 0.4 percent to $1,718.90.
    Echoing Lan's price outlook, Reuters market analyst Wang Tao
expected spot gold to consolidate in the range of $1,705.64
to$1,730 an ounce for one or two trading sessions before seeking
a direction.    
    
    
    LIGHT PHYSICAL BUYING IN ASIA
    In the physical bullion market, dealers reported light
buying interest in Asia.
    "We saw some decent buying when prices broke below the
$1,730-level, but overall there isn't much demand for physical
metal, as many are sidelined towards the end of the year," said
a Hong Kong-based dealer.
    Gold bar premium in Hong Kong was quoted in the range of 60
cents to $1.10 an ounce above London prices, versus 50 cents to
$1 last week.
    Sales of U.S. American Eagle gold coins in November are set
to be the strongest in 14 years as uncertainty surrounding the
U.S. fiscal crisis and the presidential election triggered
safe-haven buying, dealers said. 
    
    Precious metals prices 0725 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1718.90    4.01   +0.23      9.92
  Spot Silver        33.60    0.21   +0.63     21.34
  Spot Platinum    1601.20    1.70   +0.11     14.95
  Spot Palladium    679.00    2.00   +0.30      4.06
  COMEX GOLD DEC2  1718.90    6.20   +0.36      9.71        15005
  COMEX SILVER MAR3  33.68    0.40   +1.20     20.65         5426
  Euro/Dollar       1.3029
  Dollar/Yen         82.31
  COMEX gold and silver contracts show the most active months  
 
 (Editing by Himani Sarkar)
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