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Gold futures - Weekly outlook: December 31 - January 4

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Shutterstock photo - Gold futures ended Friday's session lower, as investors turned to the relative safety of the U.S. dollar amid ongoing uncertainty surrounding talks between U.S. lawmakers to avoid the looming fiscal cliff crisis.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery shed 0.45% on Friday to settle the week at USD1,656.45 a troy ounce.

On the week, gold futures dipped a modest 0.15%, as trading volumes remained light, with many investors already away on holidays.

Gold prices were likely to find support at USD1,636.45 a troy ounce, the low from December 21 and resistance at USD1,672.75, the high from December 20.

Market players remained focused on developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1 unless Democrats and Republicans agree how to cut the deficit.

U.S. President Barack Obama met with congressional leaders at the White House Friday afternoon, but both sides failed to reach an agreement ahead of the looming year-end deadline.

The gathering included House Speaker John Boehner and Senate Minority Leader Mitch McConnell, both Republicans, as well as Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats.

The House of Representatives is due to return to Washington on Sunday. The Senate will be in Sunday as well to try to reach a last-ditch agreement.

Without a deal, the U.S. could fall back into recession and drag much of the world down with it.

Adding to the cautious trade environment, Italy saw borrowing costs edge higher at an auction of five- and- ten-year government bonds, amid uncertainty ahead of national elections in February.

Rome sold EUR3 billion of 10-year bonds at an average yield of 4.48%, up from 4.45% last month. The country also auctioned EUR2.87 billion of five-year debt at a yield of 3.26%, compared to 3.23% a month earlier.

Meanwhile, revised data showed that France's economy grew by a meager 0.1% in the third quarter, down from an initial estimate for growth of 0.2%. The euro zone's second largest economy shrank 0.1% in the second quarter, unchanged from the previous estimate.

The news prompted investors to shun riskier assets, like stocks and high yielding currencies, and move in to safe-haven assets, such as the U.S. dollar and Treasurys.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, rose 0.1% Friday to settle the week at 79.79, the highest level since December 14.

A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.

Despite losing nearly 3.5% in December, gold is still up almost 5.5% for the year, thanks to a rally in the first half of 2012 driven by ultra-low interest rates and aggressive monetary stimulus from global central banks.

In the week ahead, investors will be eyeing Friday's highly-anticipated data on U.S. nonfarm payrolls, as investors attempt to gauge the strength of the country's economic recovery.

Any improvement in the U.S. economy could scale back expectations for further easing from the Federal Reserve.

Elsewhere on the Comex, silver for March delivery fell 0.65% on Friday to settle the week at USD30.04 a troy ounce. On the week, silver futures were little changed.

Meanwhile, copper for March delivery declined 0.4% Friday to close the week at USD3.588 a pound. Copper prices added 0.66% on the week. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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