LONDON: Gold rose more than 1 percent to a two-week high yesterday, in line with other commodities and stock markets after the US Congress passed a bill fending off huge tax hikes and spending cuts that threatened to jeopardise economic growth.
Lawmakers on Tuesday approved the deal to prevent the world’s largest economy from falling off the so-called “fiscal cliff” and into recession. Gold was up $16.80 at $1,691.34 per ounce at 15.41 GMT, after earlier touching a two-week peak of $1,694.70. US gold for February rose $16 an ounce to $1,691.80 an ounce.
“My sense, across all markets, is that the path of least resistance is higher,” said Tom Kendall, head of precious metals research at Credit Suisse. “But it’s clear that people know there is a lot more negotiation to go as we move through January and February.”
“Gold will be benefiting from an anticipation that the dollar will weaken as risky assets go up,” Nic Brown, an analyst with Natixis, said. A softer dollar boosts commodities priced in the greenback by making them cheaper for holders of other currencies.
Gold is traditionally an inflation hedge and a market that investors rush to in times of trouble, but the metal has lately behaved more like an industrial commodity - rising and falling with the stock market and sometimes even following the dollar.
Ole Hansen, a vice president at Saxo Bank, said that if gold closes above a current resistance level of around $1,685, the metal could attract more speculative buying, with $1,721 in sight.
Gold ended up around 7 percent in 2012, the 12th straight year of gains, although it recorded a soft final quarter to the year when it fell 5.4 percent, its worst quarterly performance since the July-to-September period of 2008.
Its struggle to maintain traction has dented some investors’ confidence in the metal, curbing a stronger move in prices.
Indian gold futures extended gains to their highest in two weeks after the finance minister hinted at making imports of the metal more expensive, triggering speculative buying from physical traders.
Among other precious metals, silver was up 3.17 percent to $31.24 an ounce, while platinum firmed 2.21 percent to $1,569.00 and palladium rose 2.92 percent to $712.22 an ounce. Platinum ended 2012 up around 10 percent.
Reuters
