Bloomberg News

Gold Poised for Worst Week in Six Months on U.S. Budget Talks

December 20, 2012

Gold headed for the worst week in six months as the struggle by U.S. lawmakers to reach a budget deal strengthened the dollar, countering purchases by central banks and investors. Silver dropped to a four-month low.

Spot gold fell as much as 0.7 percent to $1,635.80 an ounce and was at $1,641.70 by 11:35 a.m. in Singapore. It declined to $1,635.70 yesterday, the lowest price since Aug. 22, after data showed the U.S. economy grew at a 3.1 percent annual rate last quarter, exceeding all projections in a Bloomberg survey. Bullion is 3.2 percent lower this week, the most since the period to June 22, set for a fourth weekly drop.

Bullion is 5 percent higher this year, set for a 12th annual gain, as central banks joined investors in buying gold to diversify assets. The dollar snapped a five-day decline today after House Republican leaders canceled a planned vote on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million amid stalled budget talks. Fewer than two weeks remain to avert more than $600 billion in automatic spending cuts and tax increases, known as the fiscal cliff.

“There are risks around the negotiations and that’s a big part of what’s moving the markets now,” Alexandra Knight, an analyst at National Australia Bank Ltd., said from Melbourne. “Until that gets resolved, there’ll be a lot of volatility in the market.”

Record ETPs

Gold for February delivery fell 0.3 percent to $1,641.50 an ounce on the Comex in New York. Holdings in ETPs expanded 12 percent this year to a record 2,632.516 metric tons yesterday, data compiled by Bloomberg show. Brazil boosted gold reserves for a third month in November to double the country’s holdings and push them to the highest level in 12 years, joining Belarus and Russia in adding to bullion assets last month.

Cash silver fell as much as 1.1 percent to $29.645 an ounce, the cheapest since Aug. 22, before trading at $29.815, trimming this year’s advance to 7.1 percent. Silver is 7.7 percent lower this week for the worst such performance since December 2011.

Spot platinum dropped as much as 0.5% to $1,543.25 an ounce, the lowest price since Nov. 9, falling for a fifth day. The best performing precious metal, which last traded at $1,549.75, is down for the first week in three, paring this year’s gain to 11 percent. Palladium fell 0.6 percent to $675.50 an ounce.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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