Gold declines on US economic recovery, budget-deal optimism

SINGAPORE: Gold today dropped for the first time in four days as optimism that the US economy is recovering and lawmakers will reach a budget deal damped demand for the metal as a protection of wealth.

The gold fell 0.4 per cent to USD 1,651.62 an ounce in Singapore. It lost 2.3 per cent last week, the most since the period to June 22, after data showed that consumer spending, durable-goods orders and industrial output increased in November.

Silver also fell 0.1 per cent to USD 29.92 an ounce. The markets in the UK and US were closed for Christmas and Winter break.

A separate report showed the largest economy grew at a 3.1 per cent annual rate last quarter, exceeding all projections.

President Barack Obama and House Speaker John Boehner have not yet been able to reach a deal to avert more than USD 600 billion in automatic spending cuts and tax increases from January one, known as the fiscal cliff.

Holdings in gold-backed ETPs reached a record 2,632.516 tonnes, and have expanded 12 per cent this year.

Gold has increased by 5.9 per cent this year, set for a 12th annual gain, as investors sought the metal to hedge against weakening currencies and the threat of inflation after central banks around the world boosted stimulus to prop up economies.