GLOBAL MARKETS-Gold tumbles, shares up on some progress in US budget talks

Thu Dec 20, 2012 3:52pm EST

* Gold breaks below 200-day moving average for the first
time in 4 months
    * Wall St advances on 'fiscal cliff' talks
    * IntercontinentalExchange buys NYSE Euronext for $8 billion


    By Angela Moon
    NEW YORK, Dec 20 (Reuters) - Gold prices tumbled to their
lowest since August on a burst of year-end selling on Thursday,
while global shares edged slightly higher on signs of modest
progress in negotiations about the U.S. "fiscal cliff".
    Wall Street advanced in late afternoon trade after
Republican House Speaker John Boehner pledged to keep working on
a solution to the "fiscal cliff" while still criticizing
President Barack Obama's approach to budget talks.
 
    Investors have hoped policymakers would reach an agreement
soon, but progress has been slow. Boehner said he expected to
continue to work with Obama to find a solution, but repeated his
charge that Obama and the Democrats were trying to "slow walk"
the country over the fiscal cliff. 
    Gold prices plunged below $1,650 an ounce, falling more than
1 percent as heavy liquidation by hedge funds and signs of an
improving U.S. economy triggered a technical sell-off that sent
prices to their lowest in four months. 
    The metal broke below its 200-day moving average as
safe-haven bidding faded after a government report showed the
U.S. economy grew at a faster-than-expected 3.1 percent annual
rate in the third quarter. 
    Silver also dived 4 percent and platinum group metals fell 
around 2 percent.
    "There is a concern among the hedge funds that they will
have more redemptions because of the fact that they
underperformed the markets this year as a whole," said Jeffrey
Sica, chief investment officer of SICA Wealth Management which
has over $1 billion in assets.
    Spot gold was down 1.3 percent at $1,645.10 an ounce,
having hit a low of $1,635.09, the weakest since Aug. 22.
    Silver, which tends to have higher volatility than
gold, was down 4.1 percent to $29.71, having hit a four-month
low of $29.60 an ounce.
    
    FISCAL CLIFF TALKS
    Stocks rallied earlier in the week on signs of progress in
the fiscal cliff negotiations, but with the S&P 500 up 14.6
percent so far this year, investors are taking the opportunity
to engage in some hedging as 2012 comes to a close.
 
    Republicans in the U.S House of Representatives pushed ahead
with their own fiscal plan, complicating negotiations with the
White House over a way to avoid a series of steep tax hikes and
spending cuts due in early 2013. Obama has vowed to veto the
plan. 
    "Speaker Boehner went on the air (on Thursday) and basically
told us he doesn't like what the president's doing or not doing,
and the markets rallied on that, which was kind of weird. But we
have very light volume," said Stephen Guilfoyle, a trader at
Meridian Equity Partners in New York. About 4 billion shares had
changed hands on major U.S. exchanges, a typically light day of
trading for late December. 
    NYSE Euronext was the day's biggest gainer, surging
33.5 percent to $32.12 as the S&P 500's top percentage gainer,
after IntercontinentalExchange Inc said it would buy the
operator of the New York Stock Exchange for $8.2 billion. ICE
shares were last down 0.7 percent at $127.40. 
    MSCI's world equity index has risen steadily
over the past five weeks on optimism that a budget deal would
clear the way for stronger growth in 2013. It was up 0.1
percent, slightly above 342 points on Thursday, not far from
levels last seen in July 2011.
    The Dow Jones industrial average was up 17.63 points,
or 0.13 percent, at 13,269.60. The Standard & Poor's 500 Index 
 was up 4.35 points, or 0.30 percent, at 1,440.16. The
Nasdaq Composite Index  was up 2.44 points, or 0.08
percent, at 3,046.80. 
    In Europe, shares stuttered as indexes approached levels
considered overbought. The FTSEurofirst 300 closed
virtually unchanged at 1,142.80 points. The 14-day relative
strength index, a widely used technical momentum indicator,
stood at 67.5, close to the 70 and above level that is
considered "overbought."
    In other markets, currencies held to tight ranges in thin
pre-holiday trade, with the euro see-sawing against the U.S.
dollar while investors struggle to gauge developments on U.S.
budget talks against a backdrop of generally positive U.S.
economic data.
    In afternoon New York trade, the euro recouped midday losses
to gain 0.08 percent, trading at $1.3236. On Wednesday,
the euro hit an 8-1/2-month high of $1.3308. Still, market
players were mostly positioned for a U.S. deal to be reached on
time, with some expecting the euro to go as high as $1.3500 by
early January.
    The euro had been as high as $1.3295 earlier on
Thursday. Investors responded to better-than-expected U.S.
third-quarter GDP data and it held gains after the release of
more robust economic numbers.
    Investors had bought more euros - a currency that tends to
benefit in times of increased risk appetite - as recovery in the
world's largest economy seemed to be on track. 
    The euro edged up 0.07 percent to 111.70 yen. The
dollar slipped 0.02 percent to 83.38 yen. The Japanese
currency had earlier slipped against the dollar after the scale
of asset purchases set by the Bank of Japan disappointed some
investors who had positioned for more aggressive easing.
    The Japanese central bank increased its asset buying by 10
trillion yen and said it would debate next month whether there
is room to raise its inflation target, a move that could weaken
the currency.  
    U.S. Treasuries prices turned flat, paring earlier gains
mid-afternoon Thursday, as Wall Street stocks climbed to session
highs on revived optimism about a coming budget deal that will
avert a U.S. fiscal crisis, which curbed some bids for bonds.
    Benchmark 10-year Treasury notes were up 1/32 
in price with a yield of 1.803 percent. Earlier, they were up
11/32 with a yield 1.767 percent, down 4 basis points from late
on Wednesday.
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