Gold edged up yesterday, on course to squeeze out a gain for November, but progress was capped as the market took its cue from hesitant sentiment in stock markets on mixed signals around talks to avoid a US budget crisis.
Spot gold gained 0.33% to $1,730.4 an ounce by 1133 GMT, headed for a 1.3% weekly drop but a 0.6% monthly gain. US gold GCcv1 was up 0.21% at $1,730.80.
While bullion recovered from a 1-1/2-week low of $1,705.64 an ounce hit on Wednesday in a technically-driven sell-off, upside resistance held at $1,750 an ounce in a market roiled by conflicting comments from Washington about the US budget negotiations.
House of Representatives Speaker John Boehner said on Thursday that “fiscal cliff” talks with the White House had made no substantive progress and criticized President Barack Obama and Democrats for failing to get serious about including spending cuts in a final deal.
If the parties fail to reach an agreement, $600bn in tax hikes and spending cuts — dubbed the “fiscal cliff” — will automatically start in early January, threatening to push the world’s top economy into recession.
Analysts have said that protracted and faltering progress in the fiscal talks would support gold’s safe-haven credentials, but the market is in risk asset mode - taking impetus from stocks and other assets associated with growth.
“We’re back in the middle of a range. $1,750 is difficult to break,” said Simon Weeks, head of precious metals at Scotia Mocatta. “A weaker dollar is the key factor supporting the price, but gold has still not fully recovered from Wednesday’s selloff.”
Weeks said that if a breakthrough does emerge in the US fiscal negotiations, gold would likely initially follow any bounce in risky assets such as shares and commodities, before disconnecting.
“The knee-jerk reaction will be for gold to follow other markets up or down, and after its initial reaction, it will tend to decouple,” he said.
Technical analysis suggested signals were mixed for spot gold, as it was not clear that a rebound from Wednesday’s low $1,705.64 had been completed, according to Reuters market analyst Wang Tao.
On the investment front, Commerzbank said in a daily market report yesterday that inflows of gold into exchange-traded funds (ETFs) highlighted buoyant demand for the yellow metal.
“ETF investors, who are generally regarded as taking a longer-term view, are proof that gold remains in high demand as a store of value and a safe haven despite all the price fluctuations,” Commerzbank said.
“We are confident that the gold price will continue to climb in 2013.”
Holdings of SPDR Gold Trust GLD, the world’s biggest gold-backed exchange-traded fund, stood at a record high of 1,347.018 tonnes, up nearly 11 tonnes in its fourth consecutive month of rise.
Global gold demand in 2013 should be led by further strength in Chinese demand and a recovery in India, helping the precious metal continue its bull run into its 13th year, the industry-backed World Gold Council said yesterday.
Gold importers in India, the world’s biggest buyer of the metal, continued to pile up bargain stock in view of the wedding season, as prices extended losses for a fourth day to hit their lowest level in two weeks
Spot palladium rose 0.81% to $687.25, on course for a fifth week of gains and a monthly rise of more than 14%, its strongest since December, 2010.
Concerns about supply and technical buying helped send palladium to a 2-1/2-month high of $689 on Thursday.