PRECIOUS-Gold edges up, but U.S. fiscal talks drag

Mon Dec 24, 2012 12:05am EST

* Gold ticks up but holds near 4-month low
    * Price still on track for 12th straight year of gains
    * Prices to test support at $1,631 - technicals
 

 (Updates prices, adds quotes)
    By Lewa Pardomuan
    SINGAPORE, Dec 24 (Reuters) - Gold ticked up a little in
thin pre-holiday trade on Monday as equities regained some
strength, but prices stayed near their weakest in four months as
the U.S. fiscal stalemate drove  investors to the sidelines. 
    Hedge funds and money managers slashed their net long gold
positions in the week to Dec. 18 to their lowest level since the
end of August, according to the Commodity Futures Trading
Commission's Commitments of Traders report on Friday.
 
    Despite the recent losses, gold remains set for a 12th 
straight year of gains on rock-bottom interest rates, concerns
over the financial stability of the euro zone, and
diversification into bullion by central banks.
    Gold added 72 cents to $1,656.81 an ounce, having
fallen to its weakest since August at $1,635.09 last week. 
    Bullion, traditionally an inflation hedge, hit a record
around $1,920 in September 2011 when a worsening debt crisis in
Europe sparked a buying rush.
    "We are expecting thin trading volumes due to the
festivities and because of this, gold is prone to volatility. I
don't to expect any surprises. I believe gold should hold above
$1,625," said Brian Lan, managing director of GoldSilver Central
Pte Ltd in Singapore.
    "It's unlikely that we will see any resolution on the fiscal
cliff before the end of the year as the Republicans and the
Democrats have differences to iron out. I don't think it can be
solved within these few days." 
     Some U.S. lawmakers voiced concern on Sunday the country
would go over "the fiscal cliff" in nine days, triggering harsh
spending cuts and tax hikes that could send the economy back
into recession. 
    U.S. gold for February fell $2.30 an ounce to
$1,657.80.      
    
    Some analysts say an impasse in the U.S. budget talks boosts
gold's safe-haven appeal, but others argue the metal is
increasingly behaving like a risk asset, which is why a budget
deal could offer investors some direction. 
    In other markets, Asian shares steadied in quiet pre-holiday
trade after a fall late last week, with investors unsure whether
the United States can avoid a fiscal crisis. 
    The White House on Friday tried to rescue stalled talks on a
fiscal crisis after a Republican plan imploded in Congress, but
there was little headway as lawmakers and President Barack Obama
abandoned Washington for Christmas. 
    Silver was little changed at $30.06 an ounce,
platinum rose $1.25 an ounce to $1,535.50 and sister
metal palladium added $2.47 to $678.97 an ounce.
    "We have a positive view of precious metals prices in the
first half of 2013 on the basis of further money accommodation
and a rebound in economic growth," said BNP Paribas in a report.
 
   "Given its strong fundamentals, we believe that palladium has
the most upside potential over the next two years."
    Norilsk Nickel, the world's largest producer of palladium
and nickel, expects the palladium market to remain in a deficit
in the next several years largely due to a near depletion of
Russian state supplies. 
    Palladium is mainly used in making vehicle catalytic
converters to clean engine exhaust. 
    
  Precious metals prices 0430 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1656.81    0.72   +0.04      5.95
  Spot Silver        30.06    0.08   +0.27      8.56
  Spot Platinum    1535.50    1.25   +0.08     10.23
  Spot Palladium    678.97    2.47   +0.37      4.06
  COMEX GOLD FEB3  1657.80   -2.30   -0.14      5.81         6446
  COMEX SILVER MAR3  30.13   -0.08   -0.26      7.92         1354
  Euro/Dollar       1.3180
  Dollar/Yen         84.33
 
     
      

 (Editing by Eric Meijer)
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