Gold extends gains, heads for 12th annual rise
London , December 31, 2012
Gold rose almost 1 percent to $1,668 an ounce on Monday and was on track for a 12th straight annual gain, underpinned by uncertainty over whether US politicians will resolve a US fiscal crisis.
US lawmakers pushed the country to the edge of the so-called "fiscal cliff" on Sunday as they struggled to reach a last-minute deal that could protect the world's largest economy from a politically induced recession. After adjourning for the day, the Senate will reconvene at 1600 GMT on Monday.
"As long as there are no conclusions on the budget talks, the market will be trading upwards," Bernard Sin, a trader at MKS Finance said.
"You see some producer selling into the rally."
Unless a deal is reached on the US budget, some $109 billion of across-the-board spending cuts are due to kick in immediately at the start of the new year and eventually amount to $600 billion in tax increases and spending cuts.
Failure to clinch a deal may spur safe-haven buying of gold, but if the White House and Congress reach an agreement, the metal may track stock markets higher.
Sin said some participants had been reluctant to take new positions as they square their books before the end of the year.
Gold extended gains during European trading hours and was up $11.34 or 0.69 percent at $1,666.24 per ounce at 0931 GMT, having earlier risen to a session high of $1,668.70.
Gold was up around 6 percent for the year, heading for a 12th straight year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks.
US gold for February rose $11.10 an ounce to $1,667.00.
Market holidays were in force in Japan, South Korea, Taiwan, Indonesia, Thailand, the Philippines and Vietnam, with half-day trading in Australia, New Zealand, Hong Kong and Singapore.
Several major Asian stock indexes closed on Monday, with the strongest annual gains in years, but these were overshadowed by the lack of progress in talks to avert the looming U.S. "fiscal cliff".
In foreign currency news, the yen held above a two-year low versus the dollar on Monday but remained on track for its largest annual drop in seven years, pressured by expectations for more forceful monetary easing by the Bank of Japan.
ALL EYES ON FISCAL CLIFF
An agreement on the US budget would be viewed as a positive for riskier currencies such as the euro and Australian dollar, while a deadlock would be deemed positive for the safe-haven and highly liquid dollar.
A softer dollar boosts commodities priced in the greenback by making them cheaper for holders of other currencies.
Buoyed by his re-election in November, President Barack Obama has insisted that any deal must include a tax increase on the wealthiest Americans, who have seen their earnings rise steadily over the past decade at a time when income for the less affluent has stalled.
Silver was up 0.57 percent to $30.17 an ounce, while platinum rose 0.49 percent to $1,525.49 and palladium firmed 0.48 percent to $698.31 an ounce. - Reuters