* Prices up for 4th day; gaining only 1 pct over 1 week
* Even with holidays, traders find moves surprisingly small
* Dealers see $1,640-$1,670 trading range in the near term
(Recasts, adds new market commentary and updates prices to
close of US futures session)
By Barani Krishnan and David Brough
NEW YORK/LONDON, Dec 27 Gold prices rose for a
fourth straight day on Thursday for their longest winning
stretch in nearly two months, but the gains were small for a
market seen as a key hedge to the U.S. fiscal crisis, dealers
Bullion prices have crept up since Dec. 21, though they have
gained no more than 1 percent in all as America heads for
another possible recession from punitive tax hikes and spending
cuts scheduled to start as early as next week.
Traditionally a safe-haven and inflation hedge that
investors rush to in times of trouble, gold has lately behaved
like any risk asset -- often rising and falling with the stock
market and sometimes even following the dollar.
This week's moves in gold -- even with the thin trading
volumes that accompany the holiday season -- were surprisingly
tiny as the clock ticked toward a year-end deadline for action
to avert the so-called U.S. fiscal cliff, dealers said.
U.S. stock indices -- the Dow, S&P 500 and
Nasdaq -- have lost about 2 percent on the average in
the last four sessions.
"If this is all gold can do as we fall off the cliff, then
it's got real trouble ahead in terms of direction," said Frank
McGhee, head precious metals trader at Integrated Brokerage
Services in Chicago.
"The fiscal cliff is bearish; it's higher tax rates and
lower spending and it's recessionary, so gold should have moved
up a lot more by now if it's a hedge towards that. If it's
trading as a risk asset, it should have fallen more sharply. But
here we are, trapped in a range."
Gold's February futures contract on COMEX, the most
active on the New York exchange, settled at $1,663.70 an ounce,
up $3, or 0.2 percent on the day. Over the past week, it has
gained $17.80, or just over 1 percent, after hitting a
four-month low of $1,645.90 on Dec. 20.
The spot price of bullion, which trades through the
day, hovered at around $1,664 an ounce, up about $5 or 0.3
percent from Wednesday's late afternoon levels. Since last
Thursday, the spot price has gained $17 or 1 percent.
Gold prices barely budged on news that the U.S. Congress
will hold a work session on Sunday beginning at 6:30 p.m. EST
(2330 GMT), a day before the Dec. 31 deadline for the fiscal
cliff, to try and reach a deal.
The United States faces $109 billion in across-the-board
spending cuts starting in January unless a deal is reached to
either replace or delay them. Democrats, led by President Barack
Obama, want to switch the spending cuts to tax increases for the
most part -- a plan opposed by Republicans led by John Boehner,
Speaker of the U.S. House of Representatives.
Most traders expect gold to move in a $30-$40 band until
some conclusion is reached over the fiscal crisis.
"If the politicians reach an agreement on the fiscal cliff,
the dollar could suffer and there could be more investment into
gold," said Afshin Nabavi, head of trading at London's MKS
Finance, who expects gold to trade at $1,650-1,670 near term.
Reuters market analyst Wang Tao said the spot price
could drop into a range of $1,397-$1,447 per ounce over the next
three months, as indicated by its wave pattern and a Fibonacci
Since the turn of the century, gold has experienced one of
the longest bull runs in a commodity, with bullion prices set
for a 12th straight year of gains.
Much of this year's gains were aided by ultra-loose monetary
policy by the world's leading economies, bullion buying by
central banks trying to diversify foreign reserves and concerns
over the financial stability of the euro zone.
In India, the world's No. 1 gold buyer, demand for the
precious metal was strong from jewellers restocking for a
festival, although retail buying on the whole was weak.
In industry news, Randgold Resources Plc said it had
cut the production forecast for its troubled Ivory Coast gold
mine after a fire over Christmas at the project's mill.
In other precious metals, silver was up 0.7 percent
to $30.18 an ounce, platinum eased 0.1 percent to
$1,531.24 and palladium rose 2.2 percent to $704.97.
(Additional reporting by Lewa Pardomuan in Singapore; editing
by Andrew Hay)