* Analysts see gold rising if budget deal reached
* Gold heading for 12th straight year of gains
* Gold demand in top consumer India seen moderate
By David Brough
LONDON, Dec 28 (Reuters) - Gold edged lower on Friday ahead
of talks to prevent the United States from plunging off a
so-called "fiscal cliff" of tax increases and spending cuts, but
prices were still on track for their first weekly gain in a
Failure to clinch a deal in the United States could trigger
safe-haven buying of bullion, but if the White House and
Congress do reach an agreement, gold may track stock markets
Gold fell $2.77 or 0.17 percent to $1,660.52 an ounce
by 1442 GMT. It has come off a four-month low of $1,635.09 hit
on Dec. 20.
For the year, gold is up around 6 percent but is still well
below a record high of around $1,920 reached in September 2011,
when a worsening debt crisis in Europe sparked a buying rush.
U.S. gold for February eased $2.00 an ounce to
Andrey Kryuchenkov, an analyst with VTB Capital, said he
expected gold to rise along with equities if a timely compromise
is reached on the U.S. budget.
"Gold will follow the rest - it will be trading with the
risky assets," he said.
Peter Fertig, an analyst with Quantitative Commodity
Research, also said he expected gold to rise with equities and
commodities such as oil if a deal is reached.
"If there is no agreement, and people don't know what is
happening with the economy, the safe haven status of gold could
re-emerge," he added.
U.S. President Barack Obama and lawmakers are launching a
last-chance round of budget talks days before a New Year's
deadline to reach a deal to head off tax hikes and spending cuts
that amount to $600 billion.
The United States faces an immediate $109 billion in
across-the-board spending cuts starting in January unless a deal
is reached to either replace or delay them.
Gold is traditionally a safe haven and a hedge against
inflation that investors rush to in times of trouble, but it has
lately behaved like any risk asset.
It is heading for a 12th straight year of gains based on
rock-bottom interest rates, concerns over the financial
stability of the euro zone, and diversification into bullion by
In other markets, world shares sagged and the dollar climbed
before U.S. lawmakers resumed talks, while expectations that
Japan will inject new stimulus into its economy pushed the yen
to a two-year low.
The euro fell against the dollar and yen on Friday as
investors locked in recent gains, although it could trim losses
if progress is made toward a last-minute deal on U.S. budget
talks to avert tax hikes and spending cuts next year.
Global gold demand in 2013 is likely to be led by further
strength in China and a recovery in India, helping continue its
bull run into a 13th year, the industry-backed World Gold
Gold demand in India, the world's biggest buyer, was
moderate on Friday as jewellers replenished inventory for
festivals and the wedding season, but retail and investment
demand remained sluggish.
In other news, a South African lawyer moved to file a class
action suit against more than 30 gold firms on behalf of 17,000
former miners who say they contracted silicosis, a debilitating
lung disease, due to negligence in health and safety.
Silver was down 0.36 percent to $30.05 an ounce,
while platinum eased 0.49 percent to $1,522.99 and
palladium dipped 0.57 percent to $702.22 an ounce.