Gold steadies as US budget talks progress lifts stocks
Gold held near $1,700 an ounce on Tuesday, supported by gains in stocks and other commodities on hopes U.S. lawmakers will reach a deal to avert a fiscal crisis, though moves were muted as many investors took to the sidelines ahead of year-end.
European shares rose towards their highest this year, tracking gains on Wall Street and in Asia, on signs of progress over a compromise to halt $600 billion in austerity measures that could hurt the world's top economy.
Differences over how to resolve the so-called "fiscal cliff" narrowed significantly Monday night as President Barack Obama made a counter-offer to Republicans that included a major change in position on tax hikes for the wealthy, according to a source familiar with the talks.
Hopes that a deal may be imminent boosted assets seen as higher risk, with which gold has been closely correlated this year. As well as the rise in shares, oil prices climbed more than 0.5 percent, copper firmed and the euro strengthened.
Daniel Briesemann, analyst with Commerzbank, said gold investors were bargain hunting on the dips.
"There are continuous inflows into gold ETFs," he said. "This clearly shows interest from long-term investors."
Nic Brown, Natixis analyst, said expectations that a U.S. budget compromise was getting nearer, underpinned gold.
"The sense that the deal is there is helping gold," he said.
Spot gold was at $1,697.31 an ounce at 1424 GMT, little changed from $1,697.65 late on Monday, while U.S. Gold inched up 0.03 percent to $1,698.70. Silver was up 0.31 percent at $32.36 an ounce.
A backdrop of easy monetary policy from the U.S. Federal Reserve and other central banks should provide support for prices, analysts said, as investors worried about currency debasement and rising inflation flee to hard assets.
Gold prices hit their highest in a month last week after the Fed announced a fresh round of monetary stimulus in the form of a pledge to buy $45 billion a month in longer-term Treasuries. They quickly dropped back, however.