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Gold resumes its drop on renewed fiscal cliff concerns

Publish Date28/11/2012 07:40:29 AM

Last Update28/11/2012 07:40:48 AM

Gold resumes its drop on renewed fiscal cliff concerns

Precious-Gold dropped for a third straight session on Wednesday after the positive effect of the Greek debt deal has faded and investors attention turned to the slow progress made so far in the so-called U.S. fiscal cliff that could put the global economy on brink of a recession.  

The shiny metal slipped to trade around $1738.80 an ounce after touching a high of $1751.64 and a low of $1737.42. Gold resumed its drop after touching Friday`s high of $1752.06, where the trading range for today is expected among the key support at $1738.00 and key resistance now at $1775.00.

On Monday, euro area finance ministers agreed with the IMF on Greece`s coming fiscal path as they agreed to reduce Greece’s interest rates and gave it more time to pay back aid loans.  

However, the effect of the deal diminished quickly as attention shifted to the spending cuts and tax increases worth $607 billion set to take effect from January as it could push the world`s largest economy back into stagnation.

Meanwhile, there are worries that the While House and Congress can reach an agreement over the automatic tax hikes and spending cuts when they meet this week.

U.S. Senate Majority Leader Harry Reid said he is “disappointed” due the sluggish progress in negotiations between Democrats and Republicans to avert the fiscal cliff.    

“If the fiscal cliff is not avoided, a large negative shock could bring the U.S. and the global economy into recession,” the OECD said in its Economic Outlook report released yesterday.  

In the FX market, the dollar resumed its rebound for a second day as worries regarding the fiscal cliff enhanced demand on it as a favorite safe haven.

The dollar index, which tracks the dollar movements versus a basket of major currencies, rose to 80.42 after opening today`s trades at 80.35, where it is expected to face strong resistance at 80.50 levels which represents SMA 100 level on the daily charts.    

Crude oil for January`s delivery slipped to trade around $86.98 a barrel compared with the day`s opening level of $87.28.

Among other precious metals, sliver dipped to $33.80 from the day`s opening of $33.89, platinum dropped to $1601.25 from $1604.00, and palladium inched down to $662.00 from $662.50.  

Later in the day, the U.S. will release its new home sales data for the month of October followed by the Fed`s Beige Book.  

 

 

 

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