London 19/11/2012 - Gold edged higher on Monday morning after the euro gained ground on the dollar on improved hopes that the US will avoid falling off the so-called 'fiscal cliff'.
Spot gold was last quoted at $1,722.55/1,723.26 per ounce, up $9.15 on Friday's close. It has traded in a range of around $10 so far today, looking to test higher after support around $1,700 held after recent tests, although the markets is generally quiet.
"The mood is more risk-friendly today, hence the move higher [but] unless anything changes dramatically, we are still rangebound," Marex Spectron head of precious metals David Govett said, pegging resistance at $1,735-40.
On Friday, the US government has made positive noises about resolving the fiscal cliff, which would automatically trigger $607 billion in spending cuts and new taxes at the end of this year and threatens to return to the country's economy to recession.
The Republican Party, which controls the House of Representatives, said it is open to agreeing to higher taxes if accompanied by spending cuts.
The euro surged to a high of 1.2788 against the dollar and was last at 1.2772, up from near 1.2700 late on Friday and above recent two-month lows of 1.2659.
Also in focus this week are a policy announcement from the Bank of Japan, which is expected to adopt further monetary easing policies ahead of an election next month that could hand power to an opposition party, and Tuesday's eurogroup meeting, with Greece again high on the agenda.
"There are still plenty of hurdles to overcome so I'm not breathing a sigh of relief just yet," Govett added.
Heightened geopolitical tensions have also highlighted gold's safe-haven appeal. As many as 90 people have died in the conflict between Israel and Palestine, which threatens to devolve into all-out war.
"The situation in the Middle East continues, with Israel continuing its targeting of Gaza, and this in turn has also led to some buying in the precious metals," Govett said.
In India, the Mumbai market is closed after the funeral of Shiva Sena political party chief Bal Thackeray. Market participants are expected to return to work and jewellers are expected to reopen tomorrow.
US data releases scheduled later include October existing home sales and the November NAHB Housing Market Index. The US economic diary this week will otherwise be light ahead of Thursday's Thanksgiving Day holiday.
"On Thursday and with the whole American market closed that day and a lot of people also taking Friday off, I suspect the markets will start getting quieter as the week progresses. So trade the ranges and as always watch the news services for any headlines that may dictate short-term moves," Govett added.
In other precious metals, silver at $32.62/32.68 per ounce was up 52 cents on Friday's close. Palladium at $627.50-633.50 was up $2 and platinum at $1,556.50/1,566.50 was $1 higher.
(Additional reporting by Gregory Holt and Martin Hayes, editing by Mark Shaw)