Gold Gains to Three Week High, Pulls Back, on Safe Haven Demand

The price of gold is modestly higher in early trading on Friday. Concerns over the so-called U.S. fiscal cliff has been hitting markets this week, combined with concerns over the European sovereign debt situation, which is producing a safe-haven demand for precious metals that brought silver over the 30 million ounce market for the year at the U.S. Mint for only the second time in the coin’s 27 year history.

The spot price of gold is down 0.14 percent to $1,727.51 per troy ounce after turning negative on a strengthened dollar. The price of gold hit a three-week peak at $1,737.60 per troy ounce as U.S. gold edged up 0.12 percent to $1,728.10.

Stock markets across the world are under selling pressure in the latter part of the week on U.S. and European Union debt concerns, which is producing a strong drive into the U.S. dollar as a safe haven from the losses in equities. U.S. President Barack Obama is prepared to tell the public at midday Friday how he plans to address the fiscal cliff debt problem.

The week’s news from the European Union suggests the bloc is on the brink of a serious recession, according to Forbes. The German finance ministry chimed in on Friday to say that in the coming months Germany’s economy could noticeably weaken. All industrial production data coming out of major EU countries showed significant output contraction in those countries. Greece recently approved new austerity measures and remains a concern for EU countries. Against this backdrop, the euro dropped to a two-month low against the U.S. dollar on Friday.

A stronger dollar makes gold more expensive for holders of other currencies. Buying demand, which had begun to pick up at last in India just last week, has again dropped off with the higher prices in gold despite the upcoming festivals and wedding season when gold is traditionally exchanged.

U.S. economic data due for release Friday includes import and export price indexes, the University of Michigan consumer sentiment survey, and monthly wholesale trade inventories.

The London A.M. gold fix is $1,732.74 against the previous A.M. fixing at $1,717.00.

Gold bulls have negated a four-week-old downtrend in the daily bar chart this week to take a technical near-term advantage. There is solid chart resistance for gold bulls at $1,755 per troy ounce. Solid support is at $1,672.50 on the downside.

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