RE: PG and spot Gold...Bottom fishing LONDON (Dec 20) Spot gold is up just a touch in Europe Thursday, although precious metals are holding tight ranges as investors hold back from positions toward the year-end and amid uncertain price drivers.
At 1102 GMT, spot gold was up flat on the day at $1,667.58 a troy ounce, consolidating around recent lows as spooked market participants mostly exercised caution. Technically, analysts said, the bullion market remains very weak with investors most likely to seek further consolidation near current lows toward the weekend. The yellow metal is also nearing its 200-day moving average and would see follow-up selling if it were to fall below this marker, said Commerzbank AG analysts.
Analysts at ANZ said Thursday their $1,780/oz price target for gold in the fourth quarter is on thin ice as "near-term clutter is clouding gold's favorable outlook."
Importantly, they said, the U.S. fiscal cliff--a combination of tax increases and spending cuts that will come into force in January in the absence of a deal on cutting the deficit--is creating, "a lose-lose scenario for gold, that could depress prices for the next few weeks, risking a slide to $1,630/oz." Others agreed the lingering uncertainty surrounding the issue in Washington has destabilized markets, sapping directional conviction--something exacerbated by gold's unpredictable reactions to varied new items.
Analysts at VTB Capital had earlier said the metal is supported at $1,653/oz should intermediate support at $1,660/oz fail, tipping more support at $1,637/oz.
"For the time being, it seems investors are being held hostage by Washington politics and what is making things more difficult to figure out, is the fact that we have not been in such a predicament before. We will have to see what happens over the next few days, but certainly the closer we get to the Dec. 31 deadline, the more shaky markets are going to become," said Ed Meir at INTL FCStone.
"It is not clear to us that gold will assume its traditional 'safe-haven' status and push higher in the event of a complete breakdown in the talks, although in theory, we think that is a reasonable projection," he added.
Market watchers maintain, however, that in the longer-term, lower price levels create buying opportunities, with most sustaining expectations for higher prices into the next year. Forecasts for stronger gold prices in the months ahead cite sustained central bank buying, more stable Indian demand and moreover the ultra-loose monetary policy of major central banks as an important cornerstone for a bullish gold trajectory, after the Bank of Japan announced further quantitative easing measures overnight. Gold is often sought as a hedge against currency debasement and inflation in times of increased liquidity.
Elsewhere in the precious metals complex, spot silver was up 0.2% at $31.076/oz, platinum was flat at $1,583.75/oz, while palladium was 0.7% higher at $687.61/oz.