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Gold slips on U.S. budget woes, but yen lifts TOCOM

Source : REUTERS
Last Updated: Wed, Dec 26, 2012 03:53 hrs
An employee shows dividing a gold Combibar at a plant of gold refiner and bar manufacturer Valcambi SA in the southern Swiss town of Balerna

Gold edged lower on Wednesday on uncertainty over whether the United States will avoid a fiscal crisis, although a weaker yen sparked a rally in Tokyo bullion futures.

FUNDAMENTALS

Gold had dropped $5.73 an ounce to $1,652.56 by 0056 GMT, off a 4-month low struck last week. The yellow metal is still on track for a 12th straight year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks.

With the year-end deadline for the U.S. to go over a "fiscal cliff" approaching, lawmakers played a waiting game on Monday in the hope that someone will produce a plan to avoid harsh budget cuts and higher taxes for most Americans from New Year's Day.

Congress is expected to return to Washington on Thursday as President Barack Obama returns from a trip to Hawaii.

U.S. gold futures for February slipped $6.00 an ounce to $1,653.50.

Gold contracts on the Tokyo Commodity Exchange (TOCOM), which often influence movements in spot gold, rose after the yen dropped to a 20-month low against the dollar on growing hopes for further monetary easing in Japan.

MARKET NEWS

Expectations that Japan's incoming prime minister will pursue drastic stimulus policies to drive the country's economy out of deflation helped weaken the yen and underpinned the Nikkei on Wednesday, while Asian shares were capped in thin holiday trade.

U.S. crude futures edged up to around $89 a barrel on Wednesday.

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