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TheStreet Open House

Gold Falls On Uncertainty Over US Budget Talks

By SANDY SHORE

Investors are selling gold as the end of the year draws closer without a compromise in hand for the U.S. budget.

Gold for February delivery dropped $21.10 to finish Thursday at $1,696.80 per ounce.

Investors are uncertain about what's ahead for the economy if Republicans and President Barack Obama fail to agree on a new budget. Without an agreement in place, tax increases and spending cuts will occur Jan. 1 that many economists believe could send the U.S. into a recession.

The Federal Reserve has announced measures to support the economy, which typically benefit gold and other commodities. But the Fed also predicted growth will be no more than 3 percent in 2013. It also expects the unemployment rate to remain at higher levels until late 2015. The unemployment rate was 7.7 percent in November.

Although gold prices rose Wednesday on the Fed's announcement, investors began selling Thursday to lock in profits, which suggests they believe the Federal Reserve may have run out of ways to help the economy, Kingsview Financial Group analyst Matt Zeman said.

Investors are also concerned about an apparent lack of progress in the budget negotiations. "It's likely to get more erratic as the time window continues to close here in the next two weeks," he said. "I'm looking for just a lot of erratic, sloppy trade without a whole lot of meaning behind it right now."

"It's really hard to gauge what's truly going on this time of year when a lot of people have already called it a year," Zeman said.

In other metals contracts for March, silver fell $1.427 per ounce, or 4.2 percent, to end at $32.355 per ounce, copper dropped 5.6 cents to $3.66 per pound and palladium fell $9.50 to $691.65 per ounce. January palladium dropped $33.60, or 2 percent, to $1,612.80 per ounce.

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