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Gold Futures Move Higher as Dollar Declines

December 26, 2012 - In post-holiday trade on Wednesday gold futures moved higher as the U.S. weakened under the pressure of the U.S. fiscal cliff debate.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at $1,666.15 per troy ounce, accounting for a 0.4 percent gain on the day.

In very early trade, the spot price of gold had fallen as much as 0.4 percent to $1,651.62 per troy ounce and stabilized at $1,655.73 until a morning surge brought the precious metal to a high of $1,669.00 per troy ounce. Gold shed 2.3 percent last week following the release of data indicating consumer spending, durable-goods orders, and industrial output increased in November, stirring concern over the breadth of stimulus from the Federal Reserve. Prior to this morning’s surge, gold had still been up 5.9 percent for the year, accounting for the twelfth annual gain in the precious metal.

President Obama has cut his holiday vacation short in order to return to Washington and oversea the conclusion to the fiscal cliff debate.

Overseas, indications are strong that demand is picking up after months of a strong U.S. dollar pricing out many retailers. A strong greenback causes gold to be more expensive for holders of foreign currency, cutting demand.

Afshin Nabavi, a senior vice president at bullion refiner MKS Finance in Geneva, said the dollar is weakening and also we are seeing good physical demand from China as well as India.

Gold prices had dropped to a four-month low at $1,636.45 per troy ounce in late trading last week as technical selling was triggered after prices broke below their 200- day moving average. As the price levels drop and the U.S. dollar yields some of its recent strength, the demand overseas is picking up after many long of months of subdued demand, particularly in India, which also suffers from a weak rupee.

The conclusion of the fiscal cliff is likely to arrive in the coming days and that will be the next big short-term influence on the gold bullion market. Initially, there may be a drop in prices as market dynamics look elsewhere for the support it gained from fiscal uncertainty, though safe-haven buying appears to be more routine for investors and overseas markets picking up are likely to stem any heavy losses. The strong long- term bull market that has been established in gold over the last twelve years will continue regardless on central bank policy that has been effected until 2014 the earliest.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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