LONDON: Gold prices held near $1,715 an ounce on Thursday as investors' focus shifted from President Barack Obama's re-election to US fiscal woes and the euro zone debt crisis, which pressured the euro to a two-month low against the dollar.
Worries about the fiscal cliff are supportive of safe-haven gold, but a strong dollar offset upward pressure on prices by making it more expensive for buyers holding other currencies.
Spot gold was at $1,717.86 an ounce by 1443 GMT, up 0.09 percent, while US gold edged up 0.23 percent to $1,718.00.
Gold prices hit a 2-1/2 week high at $1,731.40 an ounce on Wednesday after Obama's re-election gave markets a boost by ending weeks of political uncertainty, but they have struggled to maintain those gains.
In the longer term, gold is likely to benefit from uncertainty over the looming "fiscal cliff" when nearly $600 billion worth of spending cuts and tax increases kick in with the risk of pushing the US economy into deep recession.
"We will continue with support around $1,700 and $1,680, but before the end of the year gold should gradually rise, because we have liquidity (quantitative easing), and low yields," said Andrey Kryuchenkov, analyst with VTB Capital.
Afshin Nabavi, head of trading at MKS Finance, said, "(Tackling the fiscal cliff) is not going to be an easy task but.... having seen how close the election was between the two (Obama and Mitt Romney), it seems Obama is ready to start a dialogue."
Nabavi said he saw key resistance for gold at $1,730, close to Wednesday's high, and then $1,750 and $1,800.
The euro hit a two-month low on Thursday after the European Central Bank kept its interest rates unchanged, despite growing evidence of a widespread economic slowdown.
The euro zone debt crisis was back in focus, with the euro under pressure from fresh speculation that Spain is not in a hurry to request financial aid.
Greece's government voted by a razor thin margin on Thursday to approve an austerity package needed to unlock vital aid and avert bankruptcy, despite an internal rift and violent protests at the gates of parliament.
"The Greeks managed to narrowly pass their initial austerity vote overnight, but the main budget vote is this weekend and that needs to be passed for the EU bailout to happen," Marex Spectron said in a note.
"So the euro woes remain for the time being, which will once again create uncertainty in the FX markets, with the effects affecting precious metals."
Comments
Comments are closed.