Gold Gains on Negative Comments from US Lawmakers

Gold futures dropped nearly $17 per ounce and closed lower as negotiations aimed at resolving the so-called “fiscal cliff” continued to influence investor’s sentiment. Although press and interviews this week showed that there is a huge gap between the Democrats and Republicans, although markets still believe that a deal will be struck at the last minute as always.

India’s gold imports in value terms declined by 30.3% in the April-Sept period of this year to $20.2bn, as per news reports. Global gold demand in 2013 should be led by strength in Chinese demand and a recovery in India, helping the precious metal continue its bull run into its 13th year, World Gold Council.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,348.83 tons, as on Nov 30. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 9,757.86 tons, as on Nov. 30.

Bullion’s drop accelerated, after Speaker of the House John Boehner said US lawmakers from his Republican Party & Democratic President Barack Obama are in a stalemate over a budget deal needed to avoid $600bn “fiscal cliff” of automatic tax hikes and spending cuts.

The euro touched a five-week high against the U.S. dollar on Friday, as hopes for a deal to avoid the U.S. fiscal cliff boosted market sentiment, while concerns over the euro zone eased after Germany’s parliament  approved a new aid package for Greece. EUR/USD hit 1.3038 this morning in the Asian session the pair’s highest since October 23.

Gold rose by 0.11% as investors continued to bet on easier US fiscal policy following President Obama’s victory, and as Obama seems confident of putting the “fiscal cliff” on a positive note in front of the US Congress. Silver also rose by 0.37% on renewed buying interests. Silver rebounded modestly on the back of renewed industrial demand. With strong numbers from China this morning as both official data and HSBC PMI showed an expansion in manufacturing.

Gold rallied from its biggest weekly drop in more than five months as investor holdings in exchange- traded products advanced to a record. Holdings have climbed 9.5 percent since the end of July, the data show. U.S. Mint sales of American Eagle gold coins more than doubled in November to the highest since July 2010, its website showed.

Fundamentals today include manufacturing numbers from the eurozone are likely to show a mixed picture of the economy which may result in to a small correction in as shared currency to weigh on gold prices during European market hours. Also US ISM numbers are likely to show a growing economic picture, which will dollar friendly to limit gains in this met.

Markets and gold may react to news from US lawmakers, although the Chinese data will continue to raise market optimism in today’s session. Gold is trading at 1720.95 up 8.25 in the early morning session