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Gold drops on fears U.S. fiscal cliff talks are hitting snags

Commodities Nov 30, 2012 02:47PM ET
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Investing.com - Gold prices fell in U.S. trading on Friday after U.S. Speaker of the House John Boehner said talks with Democrats on avoiding the fiscal cliff were lacking progress, which wiped out demand for risk and sparked safe-haven dollar demand.

The fiscal cliff, a combination of rising taxes and cuts to government spending converging at the close of this year, could tip the U.S. into a recession next year if Congress fails to steer the economy away from it.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 1.00% at USD1,712.15 a troy ounce, up from a session low of USD1,710.45 and down from a high of USD1,733.65 a troy ounce.

Gold futures were likely to test support at USD1,708.35 a troy ounce, Wednesday's low, and resistance at USD1,733.65, an earlier high.

Demand for gold evaporated on Friday after hopes for a prompt solution to avoid the fiscal cliff looked unlikely after House Speak John Boehner, an Ohio Republican, lamented that talks on fiscal reforms with the Democratically controlled Senate and White House were going "almost nowhere."

Sticking points involve tax hikes, with Republicans opposed to Democratic calls to let tax breaks expire for the wealthy to drum up government revenue to narrow deficits.

Republicans say such a proposal, especially without accompanying spending cuts, will hurt small business owners and hamper plans to expand and hire.

While energy and other commodities markets brushed off the news in mid-session U.S. trading on Friday, investors sold gold on anticipation of a rush for the dollar to follow suit, especially in light of soft economic indicators hitting the wire earlier.

The Chicago purchasing managers' index hit 50.4 in November, up from 49.9 the previous month but short of market calls for a gain to 50.5.

Separately, government data revealed that U.S. personal spending decreased unexpectedly in October, ticking down 0.2% after a 0.8% rise the previous month.

Analysts had expected personal spending to rise 0.2% in October.

U.S. personal income was flat last month, disappointing expectations for a 0.2% gain following a 0.4% increase in September.

Elsewhere on the Comex, silver for March delivery was down 3.05% and trading at USD33.380 a troy ounce, while copper for March delivery was up 1.05% and trading at USD3.643 a pound.







Gold drops on fears U.S. fiscal cliff talks are hitting snags
 

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