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Gold Ends Lower Amid Fiscal Cliff Uncertainty

Gold futures ended marginally lower Wednesday after a sharp plunge yesterday, as uncertainty prevailed in the U.S. budget talks with the White House rejecting House Speaker John Boehner's alternate plan to avert a fiscal cliff due January next. The precious metal was also impacted by some mixed macroeconomic data related to housing starts and building permits out of the U.S.

Housing starts in the U.S. came in below expectations in November, although building permits - an indicator of future housing demand - showed a notable increase, a report from the Commerce Department revealed Wednesday. Nevertheless, analysts believe some giveback is not a matter of concern at this point as housing starts were extremely strong in the prior 3 months.

Meanwhile, talks over a U.S. budget deal to avoid a fiscal cliff that would see tax increases and severe spending cuts in January, once again hit a roadblock with White House negotiators rejecting Speaker John Boehner's Plan B to increase taxes on incomes of $1 million and above.

Gold for February delivery, the most actively traded contract, shed $3.00 or 0.2 percent to close at $1,667.70 an ounce Wednesday on the Comex division of the New York Mercantile Exchange.

Gold for February delivery scaled an intraday high of $1,677.80 and a low of $1,664.20 an ounce.

Yesterday, gold plunged to settle at a near four-month low, losing its safe haven appeal as investors tracked the riskier equity markets with some upbeat home-builder confidence data out of the U.S. Optimistic investors continued to focus on the outcome of the crucial U.S. budget talks to avert a fiscal cliff due in January, on news of progress in negotiations for a deal

The dollar index, which tracks the U.S. unit against six major currencies, traded at 79.28 on Wednesday, down from 79.32 in North American trade late Tuesday. The dollar scaled a high of 79.38 intraday and a low of 79.01.

The euro traded higher against the dollar at $1.3242 on Wednesday, as compared to $1.3229 late Tuesday in North America. The euro scaled a high of $1.3310 intraday and a low of $1.3224.

In economic news from the U.S., a Commerce Department report revealed housing starts fell 3.0 percent to an annual rate of 861,000 in November from the revised October estimate of 888,000. Economists expected housing starts to drop to 865,000 from the 894,000 originally reported for the previous month. Meanwhile, building permits rose 3.6 percent to an annual rate of 899,000 in November from the revised October rate of 868,000. Building permits, an indicator of future housing demand, had been expected to climb to 875,000 from the 866,000 originally reported for October.

From the eurozone, Germany's business confidence improved more than expected in December, survey results from the Ifo Institute revealed. The headline business climate index rose to 102.4. The reading was forecast to climb to 102 from 101.4 in November.

Eurozone's current account surplus increased in October, but was lower than what economists expected, a report from the European Central Bank showed The seasonally adjusted current account surplus rose to 3.9 billion euros in October from 2.4 billion euros in September. Economists expected the surplus to rise to 6.5 billion euros.

Meanwhile, the Bank of England policymakers voted 8-1 to leave the stimulus program unchanged at GBP 375 billion, the minutes of the December monetary policy meeting showed.

Elsewhere, Japan posted a merchandise trade deficit of 953.4 billion yen in November, the Ministry of Finance said on Wednesday. This is down 37.9 percent on year and continues to reflect slowing exports to China with no resolution to a territorial island dispute. Sinking into the red for the fifth straight month and 12th in the last 14, the headline figure beat forecasts for a shortfall of 1,035.1 billion yen following the downwardly revised deficit of 551.1 billion in October (originally 549.0 billion yen).

by RTT Staff Writer

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