Gold rang in the New Year on a high note after lawmakers in the United States narrowly avoided toppling over the "fiscal cliff," but on Thursday, the precious metal gave up some gains as focus turned to other pressing economic matters.
Trade in bullion has been thin over the past few weeks due to the holiday season and because the fiscal cliff issue hanging over the heads of both politicians in the United States and global stock markets has made investors wary of wading into precious metals.
Gold was stuck in the low $1,660s, near four-month lows, up until December 28, but that abruptly changed on Tuesday following a US Congress vote on a Senate deal to avoid the fiscal cliff — $600 billion in tax cuts and spending increases that were set to kick in on January 1. Economists had warned that the measures would push the country into a recession.
Tuesday, gold for December delivery rocketed to $1,695/oz, its highest level since mid-December, before closing the day at $1,688.80. Some gold observers expected the yellow metal to gain in value with the uncertainty regarding US budget talks — and the inverse to happen if a resolution to the crisis was found — but in fact, the opposite occurred. Gold gained along with major lifts in world stock markets and oil, with Brent crude vaulting to a two-and-a-half-month high and the Dow gaining more than 300 points — its best-ever first day of annual trading.By Thursday, however, the US dollar index had edged up and hit a three-week high overnight, sending the price of bullion lower. The slide continued after minutes from the Federal Open Market Committee (FOMC) revealed that the United States' quantitative easing program (QE3), up to now open-ended, could end by the close of 2013.