SINGAPORE: Gold edged up on Monday, after posting its biggest weekly gain since late August, on safe-haven buying driven by worries the United States could return to recession if Congress fails to reach a deficit-reduction deal.
President Barack Obama will meet business, labour and civic leaders this week ahead of negotiations with top lawmakers to avert sharp tax hikes and deep spending cuts that loom at the end of the year, a White House official said late on Sunday.
Gold added $3.19 an ounce to $1,734.10 by 0657 GMT, holding near a 3-week high around $1,738 struck on Friday and hovering well above a 2-month low around $1,672 hit last week.
"Worries about the fiscal cliff continue to drive sentiment. Obama will speak on Wednesday on the matter, and we are seeing some signs of compromise between Democrats and Republicans," said Nick Trevethan, senior metals strategist at ANZ in Singapore.
"That may take some of the steam out of the upside story for gold, but the prospect of negative real interest rates and longer-term inflationary risks remain positives for bullion."
Uncertainty over US fiscal woes weighed on shares in Asia but euro held above a two-month low after Greece's ruling coalition secured enough votes in parliament to approve the 2013 budget law. A rebound in the euro makes dollar-priced gold less expensive.
"We continue to see upside potential in this market with $1,750 the next target," said Trevethan.
"Above there, gold is likely to struggle with very heavy resistance at $1,790-$1,800, and we do not expect the market to break above those levels on a sustained level until next year."
US gold for December rose $3.60 an ounce to $1,734.50.
At the London Bullion Market Association (LBMA) conference in Hong Kong, president of the Shanghai Gold Exchange told Reuters the bourse will launch an interbank market early next month that will start with spot contracts and gradually offer forward contracts.
Also at the same conference, general director of the People's Bank of China, Xie Duo, said the central bank has not set a time frame on issuing more gold import licenses to banks, but is keen to further open up the market to the international community.
Last week, the global head of metals at consultancy Thomson Reuters GFMS said he expected China's gold demand to grow 1 percent this year to a record of around 860 tonnes, which means the country will overtake India as the world's biggest consumer of gold for the first time on a yearly basis.
Other precious metals were also higher, with platinum rising $11.31 to $1,561.30 an ounce.
Impala Platinum Holdings Limited, the world's No.2 platinum producer, expects the market for the precious metal with industrial uses to be in deficit for 2012 and the next few years.
"We think the market is in fact moving into deficit this year, based on a significant decline in South African supply and a small reduction of jewellery being recycled because of lower prices," Derek Engelbrecht, Impala group executive for marketing, told the LBMA conference in Hong Kong.
Platinum prices have eased about 6 percent so far this month.
In the physical gold market, jewellery makers retreated, while speculators and investors waited for bullion prices to rise again before cashing in. Premiums in Hong Kong were steady at between 60 cents to $1.10 to the spot London prices.
"Jewellery makers may have to wait before they come back to buy again. I guess people are digesting the rebound in prices. A rise to $1,780 may attract selling from speculators," a dealer in Hong Kong said.
In India, gold importers paused on fresh purchases on Friday as a weaker rupee helped the metal hit its highest level in seven weeks. The festive season in India will peak with Dhanteras and Diwali this week, while the wedding season continues until December.
Gold jewellery forms a key part of gifts in weddings and festivals in India.
Comments
Comments are closed.