Gold slumps to near four-month low
- US shares drop on fiscal failure
- European shares down on US cliff worries
- Oil slips as leaders US negotiate
- AUD slips 0.7 per cent to $US1.0424
- SPI futures up 24 points to 4616
- Wall Street Week Ahead: Traders brace for the coming storm
- So what now? seven 'fiscal cliff' scenarios
Gold was near a four-month low on Friday and set for its steepest weekly loss since June as investors were discouraged by a weaker euro and stalled US budget talks.
Bullion stood at $US1,649.20 per ounce, barely changed on the day after earlier hitting a low of $US1,635.24. It touched a four-month low of $US1,635.09 on Thursday.
US Comex February gold futures were up 0.25 per cent at $US1,650.00 after hitting a low around $US1,636.
Both spot gold and US futures were on track for a fourth straight weekly drop and have so far shed about 3 per cent, the steepest fall since late June.
Gold fell on Thursday after US House of Representatives Speaker John Boehner failed to unite his Republican lawmakers behind a bid to extract concessions from President Barack Obama in so-called "fiscal cliff" talks.
The latest development casts more uncertainty on talks to avoid sweeping tax hikes and spending cuts that could push the US economy into recession in 2013. In theory, such an outcome could lift gold's safe-haven status.
"If there is a timely agreement to avert the fiscal cliff, I think gold will gain with risk assets," said VTB Capital analyst Andrey Kryuchenkov.
"I think platinum group metals will outperform gold, as they have much better supply side fundamentals," he added, referring to expectations for increased demand for platinum and palladium as the global economy recovers.
Mitsubishi analyst Matthew Turner said uncertainty over the fiscal cliff was deterring some gold investors.
"Nervousness over the fiscal cliff is possibly keeping some investors on the sidelines, as it is unclear how gold will react to the ongoing fiscal cliff talks," Turner said.
UBS said in a note: "Gold's break of the 200-day moving average around $US1,661 on Thursday spooked a lot of market participants and accelerated the sell-off. The technical picture doesn't look great, and neither does sentiment."
Global stock markets weakened on Friday and the euro slipped due to the setback in US budget talks and to evidence of Europe's ongoing economic difficulties, including a drop in German consumer morale, a revision of UK growth figures and a downgrading of Sweden's economic forecasts.
Gold price set for annual growth
Despite the recent sell-off, gold is up about 5 per cent for the year and set for a 12th straight year of growth, driven by rock-bottom interest rates, concerns over euro zone financial stability and diversification into bullion by central banks.
Iraq made its first major move in years to boost gold reserves in recent months, joining central banks from emerging market economies such as Brazil and Russia in diversifying its foreign reserves.
Lower gold prices spurred buying in the physical market, keeping premiums steady at $US1 to $US1.10 an ounce above London prices.
Among other precious metals, silver was down 0.27 per cent at $US29.86 an ounce. It has underperformed gold this week to fall 7.4 per cent and is on track for its biggest monthly drop since May.
Spot platinum was down 1.04 per cent at $US1,529.25 an ounce, while spot palladium was down 0.66 per cent at $US672.75 an ounce. Palladium has been the best performer of the precious metals so far this quarter, up 6.2 per cent.