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Fate of US fiscal cliff keeps key commodities on the edge

Key commodities stayed volatile on Friday as US lawmakers started a last-ditch effort to avert a Budget crisis in the world’s biggest economy, and the prices also remained subdued this year, thanks to the macro-economic concerns.

Key commodities stayed volatile on Friday as US lawmakers started a last-ditch effort to avert a Budget crisis in the world’s biggest economy, and the prices also remained subdued this year, thanks to the macro-economic concerns.

After rising in early trade, brent crude oil, gold and copper pared down initial gains intraday as nervousness set in about the possibility of a resolution to the so-call US fiscal cliff? $600 billion in tax hikes and spending cuts starting January, which many believe has the potential to push the world’s biggest economy into recession again.

However, gold is heading for the first weekly gain in a month, while brent crude oil is poised to climb 2% and copper 1.1%, thanks to the rise in prices earlier in the week.

Brent crude dropped 16 cents to $110.64 per barrel intraday, on course to post a 3% gain so far thia year, the weakest in four years. US crude, however, gained 13 cents to $91, on course to its first yearly loss in four years.

US President Barack Obama and lawmakers are launching a last-chance round of budget talks days before a New Year’s deadline to reach a deal. The US faces $109 billion in across-the-board spending cuts starting in January unless a deal is reached to either replace or delay them.

Gold is traditionally a safe-haven and inflation hedge that investors rush to in times of trouble, but it has lately behaved like any risk asset.

Gold is heading for a 12th straight year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks.

In other markets, world shares sagged and the dollar climbed on Friday as US lawmakers prepared to resume talks while expectations Japan will inject new stimulus into its economy pushed the yen to a two-year low.

The euro fell to a session low against the dollar on year-end dollar buying from investors adjusting their portfolios and as traders took profit on the common currency’s recent gains.

Global gold demand in 2013 should be led by further strength in Chinese demand and a recovery in India, helping the precious metal continue its bull run into a 13th year, the industry-backed World Gold Council has said.

Gold demand in India, the world’s biggest buyer, was moderate on Friday as jewellers replenished inventory for festivals and the wedding season, but retail and investment demand remained sluggish.

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First published on: 29-12-2012 at 02:07 IST
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