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Gold Drops on US Economic Optimism

Written By Brian Hicks

Posted December 27, 2012

Yesterday, spot gold dropped nearly 0.4 percent to reach $1,651.62/oz—the first time in four days that gold has fallen—as market sentiment improved over the possibility of a slow but steady U.S. economic recovery and the chances of a budget deal to avoid going over the fiscal cliff.

That comes after gold lost about 2.3 percent last week based on figures that showed increased consumer spending, industrial output, and orders for durable goods through November.

From Bloomberg:

“The U.S. economy has been recovering and the market is optimistic on resolution of the fiscal cliff,” Janet Kong, an analyst at China International Capital Corp., the nation’s largest investment bank, wrote in a note.

Gold for February delivery reached $1,658.30/oz, down 0.1 percent, on the New York Comex.

According to Bloomberg figures, gold-backed ETP holdings hit 2,632.516 tons on December 20 (a record high) and have gone up by 12 percent overall through 2012. And spot gold is up 5.9 percent over the year, marking a twelfth year of continued gains.

All things considered, it’s clear that gold continues to exert a powerful force in the markets as a bet against the vagaries of currencies and politics.

And with the fiscal cliff affair looming ahead, gold may well see abrupt gains if the White House and Congress cannot make some magic happen.