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Gold shoots up on hopes of last-minute deal to avoid U.S. fiscal cliff

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Investing.com - Gold prices spiked in U.S. trading on Monday on hopes U.S. lawmakers will vote on a late-hour deal to avoid the U.S. fiscal cliff, which pushed up demand for risk-on asset classes including gold.

On the Comex division of the New York Mercantile Exchange, gold futures for March delivery were up 1.32% at USD1,677.75 a troy ounce in U.S. trading, up from a session low of USD1,655.95 and down from a high of USD1,680.95 a troy ounce.

Gold futures were likely to test support USD1,654.15 a troy ounce, Friday's low, and resistance at USD1,724.75, the high of Dec. 12.

Talk that lawmakers are close to striking a deal that will steer the economy away from the fiscal cliff, a potentially recessionary combination of tax hikes and spending cuts due to take effect at the close of 2012, sent gold prices soaring.

The nonpartisan Congressional Budget Office has warned that failure to address the fiscal cliff could tip the U.S. economy into a recession next year.

Sticking points between the White House and congressional Republicans include tax rates on top U.S. earners and the scope of public spending cuts, though hopes President Barack Obama will announce progress to avoid the fiscal cliff later Monday sparked a rally in the gold market, a barometer for appetite for risk.

Meanwhile on the Comex, silver for March delivery was up 0.98% and trading at USD30.270 a troy ounce, while copper for March delivery was up 1.70% and trading at USD3.651 a pound.

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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.

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