Gold holds steady as market braces for fiscal cliff, solid data supports

Investing.com - Gold prices traded steady to higher on Friday as cautious bargain hunters snapped up positions amid persistent concerns that a budgetary impasse in the U.S. could tip the economy into a recession, which could spark safe-haven dollar demand.

Gold and the dollar trade inversely from one other.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were up 0.05% at USD1,697.65 a troy ounce in U.S. trading, up from a session low of USD1,694.65 and down from a high of USD1,701.65 a troy ounce.

Gold futures were likely to test support USD1,694.65 a troy ounce, the earlier low, and resistance at USD1,701.65, the earlier high.

Gold prices dropped in recent sessions on fears that a fiscal impasse may push the U.S. into a recession next year.

The White House and Congressional Republicans continue to differ over how to narrow deficits and pay down debts as part of a budget agreement for 2013.

Democrats have been calling for tax hikes on the top 2% of U.S. earners, while opposition Republicans have said deficit-reduction measures should focus more on cutting spending.

Both sides of the U.S. political aisle continue to converse on Friday with no deal in sight yet, though a few market participants crept out of the safe-haven dollar and took positions in the yellow metal.

Solid U.S. data sent gold prices rising as well.

The Federal Reserve reported earlier that U.S. industrial production beat expectations in November, expanding 1.1% after a 0.7% decline in October.

Analysts had expected industrial production to rise 0.3% in November.

Elsewhere, the Markit research group reported that the U.S. manufacturing purchasing managers' index climbed to a preliminary 54.2 in December, its best performance since April, from 52.8 in November, beating market forecasts for a decline to 52.6.

Meanwhile, the U.S. Bureau of Labor Statistics reported earlier that the country's consumer price index decreased by 0.3% in November from October, more than expectations for a 0.2% contraction and off from a 0.1% rise the previous month.

The U.S. core consumer price index, which excludes more volatile food and energy costs, rose 0.1% last month, missing expectations for a 0.2% rise and off from a 0.2% increase in October.

Meanwhile on the Comex, silver for March delivery was up 0.09% and trading at USD32.383 a troy ounce, while copper for March delivery was up 0.53% and trading at USD3.679 a pound.