PRECIOUS-Gold edges down on U.S. budget hopes before FOMC

Tue Dec 11, 2012 3:00pm EST

* Hopes over fiscal crisis talk weigh on gold
    * Profit-taking seen ahead of expected Fed asset buying
    * Asian physical gold demand seen supportive
    * Coming up: U.S. Fed Open Market Committee statement Weds

 (Updates throughout, changes byline, dateline, previously
LONDON)
    By Frank Tang
    NEW YORK, Dec 11 (Reuters) - Gold prices eased on Tuesday,
weighed down by hopes that the U.S. budget crisis can be averted
and ahead of a key Federal Reserve policy statement regarding
its monetary outlook.
    Bullion snapped a three-day winning streak, as safe-haven
bids dried up after U.S. House of Representatives Speaker John
Boehner said he remained hopeful that an agreement by the
end-of-year deadline. Boehner, however, did not offer any
concrete signs of progress on talks about the so-called fiscal
cliff. 
    Investors also lessened their bullish bets ahead of
Wednesday's Fed Open Market Committee policy statement. The U.S.
central bank is expected to announce monthly bond purchases of
$45 billion, on top of the $40 billion in mortgage-backed
security purchases it announced in September. 
    "The big money is waiting to see what the news is with the
FOMC before making their move. Gold is becoming less liquid as
there are less bids out there near the year end," said Miguel
Perez-Santalla, vice president of online precious-metals
exchange BullionVault.     
    Spot gold was down 0.2 percent at $1,707.70 an ounce
by 2:16 p.m. EST (1916 GMT).
    U.S. COMEX gold futures for February delivery settled
down $4.80 at $1,709.60 an ounce, with volume at 60 percent
below its 30-day average, preliminary Reuters data showed.
    Gold prices initially rose with equities on optimism that
ongoing talks between Boehner and President Barack Obama were
enough to avoid tax hikes and spending cuts which could send the
United States back into a recession.
    Other traders said the gold market has already factored in
expected Fed stimulus on Wednesday, and a disappointment could
trigger a sell-off.
    Prior to Tuesday's pullback, gold had risen 2 percent after
hitting a one-month low on Friday after better-than-expected
U.S. nonfarm payrolls data.
    Silver was down 1 percent at $32.85 an ounce.
    
    PHYSICAL GOLD DEMAND STRONG
    Despite Tuesday's pullback, physical bullion demand remained
strong, particularly in China, one of the world's top bullion
consumers.
    Gold premiums in Hong Kong rose to their highest in about
five months on Tuesday as Chinese banks stocked up on bullion to
avoid a supply crunch when refineries close shop for the
year-end holidays. 
    In South Africa, gold output nearly halved in October from
the same period last year, highlighting the impact of violent
strikes that swept the mining sector. 
    Among platinum group metals, platinum rose 0.9
percent to $1,632.30, while palladium was down 0.9
percent at $690.20, after it has risen around 15 percent in the
last month, outstripping gains in other precious metals.

 2:16 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1709.60  -4.80  -0.3  1706.00 1715.80   71,439
 US Silver MAR  33.017 -0.360  -1.1   32.835  33.345   23,997
 US Plat JAN   1640.00  16.70   1.0  1616.80 1642.20   13,538
 US Pall MAR    696.80  -7.95  -1.1   693.00  703.00    3,238
                                                               
 Gold          1707.70  -3.89  -0.2  1705.53 1714.20         
 Silver         32.850 -0.340  -1.0   32.790  33.260
 Platinum      1632.30  14.05   0.9  1619.50 1639.00
 Palladium      690.20  -6.60  -0.9   695.27  700.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold         74,121   186,657   174,718     13.91    0.19
 US Silver       26,041    59,215    52,736     21.24    0.94
 US Platinum     16,053     8,394     8,841     17.26    0.45
 US Palladium     3,249     6,119     4,769                  
                                                               
 
 (Reporting by David Brough in London; Editing by Marguerita
Choy)