Gold fell more than 1 percent on Monday, after U.S. President Barack Obama said a deal to reduce the country's deficit had been reached, dampening safe-haven interest that has propelled the precious metal to record highs in recent weeks.
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Jose Luis Pelaez | Iconica | Getty Images |
The most-active U.S. gold futures [GCCV1 1617.60 
-13.60 (-0.83%) 
] fell as much as 1.4 percent to $1,608.2, but recovered to $1,613.70 an ounce by 0126 GMT.
Spot gold [XAU= 1613.49 -13.10 (-0.81%) ]fell nearly 1 percent to $1,611.04, off a record high of $1,632.30 set on Friday.
President Barack Obama announced on Monday that Democrats and Republican leaders had reached an agreement to reduce the U.S. deficit![[cnbc explains]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_syuYBtGzjLe8W9Fk5fClOhG790s5E89cRSuW3RHwMqiRksLq52k-NOFdOq-9qbu1LZWEo5515kuLjaEysCN_Tv0zez3m3d3WE371DMOLEgZipK83xMKPJv1Feei9Y7e-Ta5avWsVzofCeFoagMOlTMk3L6qfleILyaVd9LTpuCMy2iNX1jDnEOl0cKtBcqew=s0-d)
and avoid default.
The Senate is likely to vote on the proposed agreement on Monday, and John Boehner, speaker of the House of the Representatives, said he would bring it to a vote in that chamber as soon as possible.
"People are selling gold as it seems a done deal now," said a Singapore-based trader.
A firmer dollar following the end of the lengthy and frustrating debt ceiling talks could further pressure gold priced in the greenback.
Speculators, anticipating an agreement on the debt ceiling, cut their long positions in gold last week, even as bullion rallied to record highs, the U.S. Commodity Futures Trading Commission data showed.
"People are still waiting to see details and whether the plan will pass the vote of the Congress," said Ong Yi Ling, an analyst at Phillip Futures.
"However, the fact that the framework is now available and lawmakers are close to an agreement is reducing the safe haven flow."
In the past few weeks, debt crises in the United States and euro zone have driven investors to seek safety in gold, sending gold up 8.5 percent in July, its best month since April.
Gold Retains Long-Term Appeal
The psychologically important $1,600-level will be a key support for gold prices. Gold could retrace another $20 to $30 if the level is breached, traders and analysts said.
Bargain hunters are likely to emerge as the price drops, as some investors bet on the long-term bullish view on gold.
-13.60 (-0.83%) ] fell as much as 1.4 percent to $1,608.2, but recovered to $1,613.70 an ounce by 0126 GMT. Spot gold [XAU= 1613.49
-13.10 (-0.81%) ]fell nearly 1 percent to $1,611.04, off a record high of $1,632.30 set on Friday. President Barack Obama announced on Monday that Democrats and Republican leaders had reached an agreement to reduce the U.S. deficit
and avoid default.The Senate is likely to vote on the proposed agreement on Monday, and John Boehner, speaker of the House of the Representatives, said he would bring it to a vote in that chamber as soon as possible.
"People are selling gold as it seems a done deal now," said a Singapore-based trader.
A firmer dollar following the end of the lengthy and frustrating debt ceiling talks could further pressure gold priced in the greenback.
Speculators, anticipating an agreement on the debt ceiling, cut their long positions in gold last week, even as bullion rallied to record highs, the U.S. Commodity Futures Trading Commission data showed.
"People are still waiting to see details and whether the plan will pass the vote of the Congress," said Ong Yi Ling, an analyst at Phillip Futures.
"However, the fact that the framework is now available and lawmakers are close to an agreement is reducing the safe haven flow."
In the past few weeks, debt crises in the United States and euro zone have driven investors to seek safety in gold, sending gold up 8.5 percent in July, its best month since April.
Gold Retains Long-Term Appeal
The psychologically important $1,600-level will be a key support for gold prices. Gold could retrace another $20 to $30 if the level is breached, traders and analysts said.
Bargain hunters are likely to emerge as the price drops, as some investors bet on the long-term bullish view on gold.
"Don't forget there's Europe in the background with problems in Italy and Spain," said Natalie Robertson, a commodities analyst at ANZ. "There is still heightened risk aversion in the market and gold will probably be volatile in the next few days."
Last week rating agency Moody's put Spain on review for a possible downgrade, adding to concerns that a Greek rescue package has done little to halt the spread of Europe's debt crisis.
In addition, U.S. economic growth remains a concern. Data last week showed that growth in the world's largest economy in the first half of the year was much slower than expected.
Platinum group metals declined, tracking the weakness in gold.
Spot platinum [PLCV1 1798.80
13.50 (+0.76%) ] fell as much as 2.2 percent in early trade to $1,771.49, before gaining some lost ground to $1,789.74.
Spot palladium [PACV1 839.95 12.25 (+1.48%) ] lost 0.8 percent to $833.22.
Last week rating agency Moody's put Spain on review for a possible downgrade, adding to concerns that a Greek rescue package has done little to halt the spread of Europe's debt crisis.
In addition, U.S. economic growth remains a concern. Data last week showed that growth in the world's largest economy in the first half of the year was much slower than expected.
Platinum group metals declined, tracking the weakness in gold.
Spot platinum [PLCV1 1798.80
13.50 (+0.76%) ] fell as much as 2.2 percent in early trade to $1,771.49, before gaining some lost ground to $1,789.74. Spot palladium [PACV1 839.95
12.25 (+1.48%) ] lost 0.8 percent to $833.22.Copyright 2011 Thomson Reuters. Click for restrictions.
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