NEW YORK: Gold edged higher on Wednesday as thin post-Christmas trading and anticipation that a US budget deal might be done before the end of the year supported bullion prices.
Trading across commodities was light, curtailed by London's Boxing Day holiday and year-end festivities elsewhere. US crude oil outperformed other markets, rising 3 percent to a 6-week high, on technical buying, Middle East tensions and signs of speedier efforts to avert the US fiscal crisis.
In gold futures, the benchmark February contract on New York's COMEX settled up $1.20 at $1,660.70 an ounce after a session high at $1,668.70.
Bullion's spot price hovered near $1,660, versus late Monday's level of around $1,658.
"Markets are thin, so few large orders can move prices quickly this week," said George Gero, precious metals analyst at RBC Capital Markets Global Futures, in New York.
He said renewed efforts by the Obama administration to avert a fiscal crisis before the end of the year represented one of the positive factors for gold in Wednesday's session.
President Barack Obama cut short his Christmas holiday in Hawaii to return to Washington early on Thursday to resume budget talks with the Republicans, in an effort to prevent some $600 billion in automatic tax hikes and spending cuts from kicking in next year. In January, the president, a Democrat, will be sworn in to serve his second four-year term in office.
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 US resolution comes through.
Some traders envisioned bullion staying at around current levels till the year-end, moving between $30 and $40 either way.
"I am still friendly with the market, but it looks like until the new year starts, it's under pressure from probably long liquidation," said Yuichi Ikemizu, branch manager at Standard Bank in Tokyo, citing the US budget talks as one of the main things on the market's agenda.
"This week, probably we will stay around here at $1,640 to $1,670."
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.
Gold demand in India, the world's biggest buyer of the precious metal, rose as prices eased following a drop in the world market and on a firm rupee. The actively traded gold contract for February delivery on the Multi Commodity Exchange (MCX) was 0.48 percent lower at 30,705 rupees ($560) per 10 grams as of 0951 GMT.
Gold dealers said there was also buying interest from bargain hunters and jewelers in other parts of Southeast Asia.
"We don't have enough stocks because of the Christmas holiday, so supply is a bit tight," said a physical dealer in Singapore, who noted light buying from Indonesia and Thailand.
Center>Copyright Reuters, 2012
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