Gold edges up, US fiscal uncertainty caps gains
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Gold posted minor gains on Monday on strength in the euro, but uncertainty about the U.S. budget talks kept bullion's advances in check.
Underscoring investors' interest in the metal, holdings of gold-backed exchange- traded funds hit a record high and speculators raised their net length in gold for the third straight week.
The euro rose to a six-week high versus the dollar after upbeat China manufacturing data helped trigger stop-loss buying, and the dollar index dropped to a one-month low, making dollar-priced commodities more attractive for buyers holding other currencies.
But the dragging negotiations in Washington to avert the "fiscal cliff", $600 billion worth of tax increases and spending cuts to roll in automatically in early 2013, kept investors on tenterhooks.
"People are more cautious because there is no clear sign when the fiscal cliff will be solved," said Brian Lan, Managing Director of GoldSilver Central Pte in Singapore, adding that gold was likely to trade in the range of $1,700 and $1,750 before the market saw any clarity in the budget talks.
The uncertainty in the talks would keep gold prices supported and attract investors seeking safety in bullion.
"From what we've seen, it is not going to be easy to push through an agreement, which will be good for precious metals," he said.
Spot gold inched up 0.3 percent to $1,719.31 an ounce by 0354 GMT, after dropping a slight 0.3 percent in November. U.S. gold gained 0.4 percent to $1,720.20.
Echoing Lan's price outlook, Reuters market analyst Wang Tao expected spot gold to consolidate in the range of $1,705.64 to$1,730 an ounce for one or two trading sessions before seeking a direction.
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