US GOLD - Investors prepare for holiday weekend while watching world headlines

By: Tom Jennemann

Murray, Kentucky 20/11/2012 - Traders in the US have started to square their books ahead of this week's Thanksgiving holiday but are keeping a eye on the escalating violence in the Middle East, the eurogroup meeting in Brussels and the “fiscal cliff” talks in Washington, DC.

Gold for December delivery on the Comex division of the New York Mercantile Exchange was last down $1.90 at $1,732.50 per ounce. Trade has ranged from $1,729.10 to $1,736.10.

Israeli jets overnight fired on Hamas targets in Gaza, while the militants lobbed rockets towards Jerusalem.

“Rising tension in the Middle East have seen investors drawn in by the safe-haven appeal of precious metals, in particular gold and silver,” Standard Bank said in a note. “Broadening the allure is the inflation-hedge argument, in that an escalation and spillover of tension might see a dramatic spike in oil prices."

Elsewhere, the eurogroup will hold a meeting in Brussels today, where political and financial leaders will discuss the terms and timing of the next Greek bailout tranche.

Also in the region, Moody's Investors Service cut France's rating to Aa1 from Aaa and kept its negative outlook.

“[Eurozone contagion] concerns have prompted some weakness in the euro, which slowed the upward momentum in precious metals earlier this morning,” Standard Bank said. “Nevertheless, the common currency seems to have stabilised, which could open up room for more upside should the Israeli-Gaza conflict appear to escalate."

In the US, Republicans in the House of Representatives have indicated some willingness to compromise with President Obama on developing a new budgetary framework to replace the fiscal cliff, which would trigger more than $600 billion in spending cuts and new taxes that could slow growth and tip the US economy back into recession.

Meanwhile, gold traders have already started the evening-out process ahead of the long Thanksgiving weekend, which typically entails selling overly extended long positions and covering shorts, George Gero, vice president at RBC Global Futures, said.

“Investors are holding off on new commitments for now. Also, better housing figures and yesterday's triple-digit stock rally have shifted the focus to other assets, where we're seeing profit-taking wherever possible,” Gero said.

In wider markets, the euro was half a cent stronger at 1.2817 against the dollar, while Germany's DAX was down 0.18 percent and France's CAC-40 was up 0.13 percent.

In US equities, the Dow Jones industrial average and S&P 500 were off 0.43 percent and 0.35 percent.

As for the more industrial commodities, light sweet crude (WTI) oil futures for December delivery on Nymex were down 58 cents at $88.70 per barrel and the most actively traded Comex copper contract was at $3.5235 per pound, 0.4 cents lower.

Comex silver for December delivery was last down 12.4 cents at $33.065 per ounce. Trade has ranged from $32.980 to $33.260.

“As their risk appetite grows, market players prefer precious metals with a more pronounced industrial character,” Commerzbank AG said.

“Accordingly, silver has risen considerably more sharply, gaining nearly 2.5 percent yesterday and achieving a monthly high of $33.26 per troy ounce this morning. This also meant that silver was the biggest winner among precious metals, followed by palladium and platinum,” it added.

Platinum futures for January delivery on Nymex were last down $6.20 at $1,577.60 per ounce, while the December palladium contract at $640.00 was $5.30 lower.

(Editing by Mark Shaw)