PRECIOUS-Gold slips on U.S. budget woes, jewellers buy

Wed Dec 26, 2012 2:18am EST

* Targets $1,397-$1,447 range in 3
mths-technicals 
    * Silver to drop to $26.11 in 3 mths-technicals
 
    * Coming Up: Redbook Weekly U.S. retail sales; 1355 GMT

 (Updates prices, adds technicals)
    By Lewa Pardomuan
    SINGAPORE, Dec 26 (Reuters) - Gold slipped in thin trade on
Wednesday as uncertainty over whether the United States would be
able to avoid a fiscal crisis kept investors at bay, but lower
prices spurred buying from jewellers. 
    President Barack Obama is likely to leave his vacation in
Hawaii to return to Washington as early as Wednesday to address
the unfinished "fiscal cliff" negotiations with Congress.
 
     A deal to avert the so-called fiscal cliff of tax hikes and
spending cuts that kick in at the start of next year and
threaten to tip the world's largest economy back into recession
would offer trading direction to financial markets.
    While gold is typically a safe-haven asset that gets a boost
from economic uncertainties, it has increasingly been behaving
like a risk asset and could also gain if a U.S. resolution comes
through. 
    "I am still friendly with the market but it looks like until
the new year starts, it's under pressure from, probably, long
liquidation," Yuichi Ikemizu, branch manager for Standard Bank
in Tokyo, adding that investors would closely watch the progress
of negotiations between the White House and Congress.
    "This week, probably we will stay around here at $1,640 to
$1,670."
    Spot gold dropped $2.15 an ounce to $1,656.14 by 0710
GMT, off a 4-month low struck last week. It is still on track
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.
     Markets in London were still shut on Wednesday for the
Christmas holiday. The next gold report is due at 8 am EST (1200
GMT).     
    
     Gold contracts on the Tokyo Commodity Exchange, which often
influence movements in spot gold, rose after the yen dropped to
a 20-month low against the dollar on growing hopes for further
monetary easing in Japan. <0#JAU:>
    But most gold investors are waiting for the outcome of the
U.S. fiscal talks after the House of Representatives failed to
pass its own budget measures last week. 
    U.S. gold futures for February slipped $2.30 an
ounce to $1,657.20.     
    In the physical market, gold dealers noted buying interest
from bargain hunters and jewellers in Southeast Asia. 
    "We don't have enough stocks because of the Christmas
holiday, so supply is a bit tight. But the premiums have yet to
rise. They are still at $1.0 to $1.20," said a physical dealer
in Singapore.
    "We are seeing light buying from Indonesia and Thailand."   
 
    In other markets, the yen sank to a 20-month low against the
U.S. dollar on Wednesday as Shinzo Abe prepared to assume
Japan's helm with a mandate to weaken its currency and push for
more drastic monetary and fiscal stimulus. 
    Asian shares and other assets were capped in thin holiday
trade, with investors focusing on the fate of U.S. negotiations
to avert a budget crunch looming at the end of the year.
 
        
  Precious metals prices 0710 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1656.14   -2.15   -0.13      5.90
  Spot Silver        29.89    0.03   +0.10      7.95
  Spot Platinum    1546.00   16.50   +1.08     10.98
  Spot Palladium    683.97    1.97   +0.29      4.82
  COMEX GOLD FEB3  1657.20   -2.30   -0.14      5.77        10097
  COMEX SILVER MAR3  29.96    0.06   +0.19      7.31         1854
  Euro/Dollar       1.3192
  Dollar/Yen         85.26
 
 (Editing by Himani Sarkar and)
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