Gold drops as U.S. budget concern boosts dollar

Silver dropped for second day

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Gold fell to the lowest level this week as concern about U.S. budget negotiations increased demand for the dollar as a haven, overshadowing record holdings in exchange-traded products. Silver dropped for a second day.

Spot gold retreated as much as 0.2 percent to $1,738.68 an ounce, the cheapest since Nov. 23, and traded at $1,740.60 at 10:13 a.m. in Singapore. The dollar was higher against most of its 16 major counterparts for a second day. Cash silver slid as much as 0.4 percent to $33.9075 an ounce and traded at $33.94.

Senator Majority Leader Harry Reid said “little progress” has been made in talks to avert the so-called fiscal cliff. If a budget deal is not reached to avoid $607 billion of automatic tax increases and spending cuts from kicking in next year, it could send the U.S. and the global economy into recession, said the Organization for Economic Cooperation and Development, which yesterday cut its global growth forecasts.

“All that lies ahead in the market is the U.S. fiscal cliff and how that progresses will determine sentiment and therefore prices,” said Xiang Nan, an analyst at CITICS Futures Co., a unit of China’s biggest listed brokerage.

Gold for February delivery was little changed at $1,743 an ounce on the Comex in New York. Holdings in ETPs, up 11 percent this year, expanded to 2,612.069 metric tons yesterday, data compiled by Bloomberg show.

Spot platinum fell 0.3 percent to $1,607 an ounce, and palladium was little changed at $667.25 an ounce.

Bloomberg News

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