You are here: Home » International » News » Companies
Business Standard

Gold at 2-wk high on Obama win focus on "fiscal cliff"

MARKETS-GOLD:Gold at 2-wk high on Obama win focus on

Reuters  |  London 

Gold bounced to its highest in two weeks on Wednesday as President Barack Obama's re-election curbed the dollar, with focus on expectations for continued relaxed U.S. monetary policy and resolving the so-called "fiscal cliff".

Rallying with world shares and bolstered by the weaker dollar, gold jumped to around $1,729 an ounce, its strongest since Oct 23. It stood at $1,726.31 by 1052 GMT, up 0.6 percent, but was still well below a record high around $1,920 struck in September last year.

U.S. gold for December rose $11.80 to $1,726.80 an ounce.

Obama won a second term in the White House, overcoming deep doubts among voters about his handling of the U.S. economy to score a clear victory over Republican challenger Mitt Romney.

Gold had rallied to an 11-month high above $1,795 an ounce on October 5 after the U.S. Federal Reserve announced a third round of aggressive economic stimulus in September.

Gold prices then drifted back to nine-week lows around $1,672 due to uncertainty over the policy impact of the U.S. election.

Analysts and investors were already shifting focus to the fiscal challenges facing Obama in his second term.

A Congress split between the two parties will keep open the likelihood of messy negotiations to avert the "fiscal cliff" - nearly $600 billion worth of spending cuts and tax increases that risk pushing the economy into deep recession.

"It is not going to be too easy for the President to reach a deal on how to resolve the fiscal cliff," said Christin Tuxen, analyst with Danske Bank.

"That is positive for the dollar," she added, referring to a possible rise in the U.S. currency as a safe haven during the rocky road towards resolving the fiscal challenges, which could limit the upside in gold prices.

By contrast, Bayram Dincer of LGT Capital Management said a resolution could occur before the deadline at the end of 2012, auguring for a slip in the dollar against major currencies and a rise in gold prices.

Dincer said gold could stand at around $1,800 an ounce by the end of 2012 and some $1,900 by the end of the first half of 2013, underpinned by a continuing relaxed U.S. monetary policy and possible further quantitative easing.


David Govett, head of precious metals at Marex Spectron, said in a market note, referring to the fiscal cliff: "I personally believe this will get sorted, but not after a lot of haggling and negotiating and this will create a lot of uncertainty and volatility in the markets."

"We will see a continuation of the loose monetary policies pursued by the Fed and Chairman Bernanke, for the foreseeable future. Low interest rates and more quantitative easing all add up to favourable metal prices," he added.

Money printing by central banks boosts gold's appeal as it keeps interest rates at a low level, reducing the opportunity cost of holding a metal that has no yield outside its actual value.

Gold importers in India, the world's biggest buyer of the yellow metal, slowed purchases in the peak festival season as prices steadied near their highest level in more than two weeks.

The festive season in main gold consumer India peaks in November with Diwali, the Hindu festival of lights. Weddings also take place at this time, with gold jewellery forming a key part of the dowry daughters receive from their parents.

But gold imports to India could fall to 550 tonnes next year, after touching 967 tonnes in 2011, as high inflation and prices bite into disposable incomes of consumers, the head of a trade body said on Tuesday.

South Africa's net gold and foreign exchange reserves fell to $48.626 billion at the end of October from $48.748 billion in September, data from the Reserve Bank showed on Wednesday.

More of the world's rich are moving their gold and other valuables away from the economic turmoil in the West to Asia, prompting precious asset shipping specialist Malca-Amit to rapidly expand its storage capacity in the prosperous region.

In other precious metals, spot platinum was up 0.53 percent at $1,558.25 and spot palladium rose 0.96 percent to $619.47.

Silver rose with gold, gaining 0.75 percent to $32.19 an ounce.

(Editing by Veronica Brown)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, November 07 2012. 16:36 IST