PRECIOUS-Gold hovers around $1,700/oz, US fiscal talks eyed

Tue Dec 18, 2012 1:57am EST

* U.S. lawmakers inch towards deal on "fiscal cliff"
    * Range-trapped gold price dampens physical buying interest
    * Spot gold could rise to $1,711/oz -technicals
    * Coming up: US NAHB Index, Dec; 1500 GMT

 (Adds details; updates prices)
    By Rujun Shen
    SINGAPORE, Dec 18 (Reuters) - Gold hovered around a key
resistance at $1,700 an ounce on Tuesday as many investors stood
on the sidelines in the penultimate week of the year, watching
U.S. lawmakers inch towards a deal to avert a fiscal disaster.
    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 expect a resolution to the problem to take some
safe-haven appeal off gold, though failure to reach 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. 
    "The $1,700 level is key resistance, but there isn't much
room on the downside as investors remain confident in gold's
outlook," said Li Ning, an analyst at Shanghai CIFCO Futures.
    Li said that stable holdings in gold-backed exchange-traded
funds showed investor interest remained.
    Hopes for a resolution to the U.S. budget tussle lifted
Asian shares and other riskier assets, while the dollar index
 languished near a near two-month low hit in the previous
session. A weaker greenback underpins the sentiment in
dollar-priced commodities by making them cheaper for buyers
holding other currencies. 
    Spot gold inched up 0.3 percent to $1,702.04 an ounce
by 0632 GMT. U.S. gold gained 0.3 percent to $1,703.60.
    Technical charts suggest spot gold may rise to resistance at
$1,711 per ounce, a break above which would open the way towards
$1,717, Reuters market analyst Wang Tao said. 
    
    Asia's bullion buyers were also reluctant to jump into the
market as prices have been stuck in a narrow range in the past
few days.
    "There is some light buying but it is not on the same level
as what we saw last year or in the year before," said a
Singapore-based dealer, adding that many market participants
have already gone on holiday.
    
  Precious metals prices 0632 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1702.04    4.39   +0.26      8.84
  Spot Silver        32.39    0.13   +0.40     16.97
  Spot Platinum    1611.49    9.00   +0.56     15.68
  Spot Palladium    699.25    2.78   +0.40      7.16
  COMEX GOLD FEB3  1703.60    5.40   +0.32      8.73        13482
  COMEX SILVER MAR3  32.46    0.17   +0.54     16.26         3982
  Euro/Dollar       1.3170
  Dollar/Yen         83.98
  COMEX gold and silver contracts show the most active months
 
 (Editing by Himani Sarkar)
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