LONDON: Gold held near $1,700 an ounce on Tuesday, supported by gains in stocks and other commodities on hopes US lawmakers will reach a deal to avert a fiscal crisis, though moves were muted as many investors took to the sidelines ahead of year-end.
European shares rose towards their highest this year, tracking gains on Wall Street and in Asia, on signs of progress over a compromise to halt $600 billion in austerity measures that could hurt the world's top economy.
Differences over how to resolve the so-called "fiscal cliff" narrowed significantly Monday night as President Barack Obama made a counter-offer to Republicans that included a major change in position on tax hikes for the wealthy, according to a source familiar with the talks.
Hopes that a deal may be imminent boosted assets seen as higher risk, with which gold has been closely correlated this year. As well as the rise in shares, oil prices climbed more than 0.5 percent, copper firmed and the euro strengthened.
"The sense that the deal is there is helping gold," Nic Brown, an analyst at Natixis, said. "Gold and silver are moving up with other commodities. Everything seems a little bit happier."
Spot gold was at $1,698.04 an ounce at 1208 GMT, little changed from $1,697.65 late on Monday, while US gold inched up 0.1 percent to $1,699.40. Silver was up 0.4 percent at $32.38 an ounce.
A backdrop of easy monetary policy from the US Federal Reserve and other central banks should provide support for prices, analysts said, as investors worried about currency debasement and rising inflation flee to hard assets.
Gold prices hit their highest in a month last week after the Fed announced a fresh round of monetary stimulus in the form of a pledge to buy $45 billion a month in longer-term Treasuries. They quickly dropped back, however.
"With the FOMC out of the way, the price pullback in gold was triggered by profit-taking before the year-end," VTB Capital said in a note. "At the same time, the previously oversold (dollar) is starting to consolidate."
"As before, we expect subdued action until the market is clear on the fiscal cliff negotiations in the US Congress, while sustained gains are still unlikely as we continue in a sideways pattern near December lows."
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