---- Markets on tenterhooks as Obama calls last-ditch budget meeting
---- Palladium hits fresh March highs
---- Platinum sinks to August lows
Most markets were on tenterhooks as President Barack Obama met with congressional leaders from the Democratic and Republican parties at the White House to restart stalled talks on the budget. The dollar rose, US Treasury yields hit two-week lows and stocks on Wall Street headed for their longest losing streak in three months as the politicians sought to avoid $600 billion in tax increases and spending cuts set to take effect on January 1. Failure to reach a deal will tips the US economy over a "fiscal cliff" and into possible recession, economists warn.
Spot gold ended the day close to its day lows around $1,655 an ounce, versus Thursday's last bid at $1,663.29. US gold futures for February delivery settled down $7.80, or 0.5 percent, at $1,655.90 an ounce in New York. Traditionally a safe haven and inflation hedge that investors rush to in times of trouble, gold has lately behaved more like a risk asset - often rising and falling with the stock market and sometimes following the dollar.
LITTLE LIGHT ON GOLD DIRECTION Spot gold and futures showed a modest loss on the week after Friday's decline wiped out gains built from Monday through Thursday. Despite the somewhat surprising swing, most dealers found this week's moves in gold too puny for a market that had been modelled as a key hedge to the US fiscal crisis. "It strikes me that the gold market really doesn't quite know where to go at this moment," said Adrian Day at Adrian Day Asset Management in Annapolis, Maryland.
"Light trading in the holidays obviously has a distorting effect on prices but if anything, the moves should be exaggerated, not muted like this." In Friday's session, volume in gold futures was around 60 percent below the 30-day average, making it one of the least traded markets on the 19-commodity Thomson Reuters-Jefferies CRB index.
Although they have moderated now, gold prices ran up sharply in the first and third quarters of this year, aided by ultra-loose monetary policies in the world's leading economies, bullion buying by central banks trying to diversify foreign reserves and concerns over the financial stability of the euro zone. The rally in those quarters has booked a 6 percent gain on the year, extending gold's winning streak to a 12th consecutive year.
PROFIT-TAKING,SAFE-HAVEN BUYING BUFFET MARKET Analysts said heavy profit-taking in gold over the past month as some bullion owners try to cash in this year's gains may be offsetting any rally culminating from those buying gold as a safe haven. "The 'fiscal cliff' only tells one half of the story in gold right now," said Edmund Moy, chief strategist at Morgan Gold in Irvine, California.
"The reality is a lot of supply has come on to the market in the last month, mainly due to people selling gold for profit to avoid higher capital gains taxes next year. The additional supply, combined with the fiscal uncertainties, is causing the flattish market," he said. The industry-backed World Gold Council said it expected the rally in bullion to extend into 2013, helped by growing demand for gold in China and India. India, the world's biggest buyer of gold, was stocking aggressively for its traditional festive and wedding season, but traders said retail and investment demand for bullion remained sluggish.
PALLADIUM CONSOLIDATES, PLATINUM UNDER PRESSURE Platinum and palladium made the biggest moves of the day among precious metals. After initially extending recent gains and hitting fresh ten-month highs, palladium sank 2 percent to $692.47 per ounce. Its largest drop in a month wiped out most of Thursday's rally to highs last seen in mid-March. The market has been on a bullish trend since November 13 when refiner Johnson Matthey projected the biggest supply deficit in 11 years in the metal largely used an auto catalyst.
"Funds have been after palladium ever since that JM report came out. There was very, very heavy buying yesterday, led by undisclosed fund out of London," said Frank McGhee, head precious metals at Integrated Broking Services in Chicago. Platinum eased 1 percent to $1,516.50 after hitting its weakest level since end-August at $511.75.
Platinum prices have been on the defensive as concerns about supplies from top producer South Africa have faded since the sprawling worker strikes that halted production at many major mines in late October. On charts, platinum's relative strength index (RSI) fell to 30 on Friday, which is often seen as technically oversold. "At this point, if there's any other pressure on platinum, it could see a fairly vicious break down. There's really nothing to hold the market up," McGhee added. Silver was down 0.5 percent at $30 an ounce.