* Gold to fall towards $1,678-technicals
* Coming Up: U.S. ADP employment report Nov; 1315 GMT
(Updates prices, activity in physical sector)
By Lewa Pardomuan
SINGAPORE, Dec 5 Gold edged up on bargain
hunting on Wednesday, but still hovered near its weakest in a
month as talks between the White House and Congress to avoid
year-end tax hikes and spending cuts showed little progress and
kept most investors at bay.
The U.S. economy could slip into recession if the two
parties failed to reach a deal to avoid a year-end budget
crisis. President Barack Obama dangled the possibility of
lowering tax rates in 2013 with a broad U.S. tax code revamp,
but stood firm on insisting rates for the wealthiest must rise
as part of a budget deal with Congress.
"I think there are a few scenarios that we could look at.
They may not come to a real, long-term deal. So we are expecting
that there will be delays, which mean they will extend the
deadline until they come to an agreement," said Lynette Tan,
senior investment analyst at Phillip Futures in Singapore.
"If this happens, gold will probably be pressured in the
short term until the reality that delaying the solution will
ultimately hurt the economy further."
Gold rose $4.10 an ounce to $1,700.84 by 0621 GMT
after falling to $1,690.64 on Tuesday, its weakest since Nov. 6,
on heavy fund liquidation and options-related selling.
U.S. gold futures for February added $7.00 an ounce
Asian shares hit a 16-month high on Wednesday, led by
Chinese equities that surged after comments from China's new
Communist Party chief Xi Jinping that raised hopes for stable
But concerns over whether the United States could avert the
so-called fiscal cliff, a series of automatic tax hikes and
spending cuts worth $600 billion that will take effect in
January unless Congress acts, kept optimism in check.
"If the U.S. really falls off the 'fiscal cliff', we are
likely to see some buying of gold for store of value and also on
the outlook that the U.S. dollar may depreciate further," said
Tan at Phillip Futures.
"This is likely to give some support to gold."
News that South Korea's central bank had purchased 14 tonnes
of gold in November using its foreign reserves in order to
spread its portfolio risks was largely ignored.
"We continue to see a risk of further sharp moves in gold
after the dead cat bounce yesterday," the ANZ said in a report.
"We are biased towards a near-term technical decline
targeting $1,670 but remain constructive on medium term
The physical market was deserted, with jewellers waiting for
a clearer price direction.
"There was some buying yesterday but today the market is
quiet once again," said a physical dealer in Singapore.
The euro rose to a seven-week high against the
dollar, while Brent crude was steady around $110 a barrel as the
oil market nursed losses from the previous two sessions on
worries the U.S. fiscal crisis could hurt demand.
Precious metals prices 0621 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1700.84 4.10 +0.24 8.76
Spot Silver 33.03 0.12 +0.36 19.28
Spot Platinum 1585.75 6.65 +0.42 13.84
Spot Palladium 679.00 1.30 +0.19 4.06
COMEX GOLD FEB3 1702.80 7.00 +0.41 8.68 12427
COMEX SILVER MAR3 33.11 0.30 +0.91 18.59 3450
COMEX gold and silver contracts show the most active months
(Editing by Himani Sarkar)