Gold held steady below $1,700 an ounce on Friday, with prices heading for their third straight weekly fall, as uncertainty over stalled US budget negotiations to avert a fiscal crisis kept investors on the sidelines.
US President Barack Obama and House of Representatives Speaker John Boehner met for 'frank' discussions on Thursday as frustration mounted over a stalemate in talks on the “fiscal cliff”, a $600 billion package of tax hikes and spending cuts due early next year.
Investors were wary of taking positions while negotiations were ongoing, and as trading wound down ahead of year-end. European shares were also little changed on Friday, while the euro eked out small gains against the dollar.
Spot gold was little changed at $1,696.30 an ounce at 13:59 SA time against $1,696.69 late on Thursday, headed for a 0.4-percent weekly drop. US gold was flat at $1,698.00.
Failure to reach agreement on handling the cliff could push the US economy into recession, but averting a crisis would likely benefit gold, which has traded closely with assets seen as higher risk, like stocks, this year.
“The assumption is that the politicians will reach a sensible resolution, which will help gold eventually,” Standard Chartered analyst Daniel Smith said. “Gold may rally when equities do, but my experience is that gold will be a laggard.”
Stimulus measures from central banks, which have kept up pressure on long-term interest rates while fuelling inflation concerns, have put gold on track for a twelfth year of gains.
But the metal took little support from the Federal Reserve's announcement this week that it will buy $45 billion of government bonds each month after its “Operation Twist” program expires, with many cashing in on brief price gains.
“Despite the Fed's implementation of QE4, the (precious metals) market remains focused on the potential adverse liquidity impact of the US fiscal cliff,” Deutsche Bank said in a note on Friday.
“Furthermore, the Fed's targeting of unemployment as a tool to gauge monetary accommodation could be taken as hawkish given the apparent decline in US unemployment over the past year.”
LOWER PRICES TEMPT INDIAN BUYERS
Indian gold importers continued to stock up for the wedding season, taking advantage as prices were pressured by a stronger rupee.
“People feel this is a good buying opportunity as prices could jump another 1,000 rupees,” Harshad Ajmera, proprietor of JJ Gold House, said.
From a technical perspective, analysts identify key resistance at gold's early December low of $1,684, at its November low at $1,670, and at $1,664, its 200-day moving average and a key retracement of its May to October rally.
Among other precious metals, spot palladium outperformed other precious metals, rising 0.4 percent to $692.00, but was set to snap a six-week winning streak with a 0.5 percent week-on-week fall.
“Palladium... received a boost from the China's manufacturing reading,” Standard Bank said in a note, referring to data showing China's vast manufacturing sector expanded in December at its fastest pace in 14 months.
“This is most likely as a consequence of China's preference for palladium as an autocatalyst. Yesterday's good news on US retail sales might also have lent some support... as the US auto sector is the other large centre of demand for this metal.”
Platinum was down 0.1 percent at $1,609.49 per ounce, and was headed for a 0.3 percent rise from the previous week.
Spot silver was hardly changed at $32.50, rebounding from a near one-month low of $32.21 hit in the previous session. The metal was also headed for a third straight weekly fall, its longest stretch of weekly losses in nearly seven months. - Reuters