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Gold Nears Three-Week High on Concern About U.S. Fiscal Cliff

Nov. 12 (Bloomberg) -- Gold climbed near a three-week high in New York on speculation investors will seek a protection of wealth as the U.S. faces a so-called fiscal cliff.

The U.S. risks entering a recession that will hurt economic growth worldwide should Congress allow more than $600 billion of tax increases and spending cuts to take effect next year, Fitch Ratings said Nov. 8. The euro approached a two-month low against the dollar as European policy makers prepared to meet to seek a plan to maintain Greek solvency and keep the nation in the common currency.

“Market focus has shifted to the uncertainty surrounding the fiscal cliff, which could boost gold prices,” Suki Cooper, an analyst at Barclays Plc in New York, wrote today in a report. “Hurdles in the form of bouts of dollar strength are likely to cap momentum. Physical demand will be pivotal in cushioning prices.”

Gold for December delivery rose 0.4 percent to $1,737 an ounce by 7:48 a.m. on the Comex in New York. Futures reached $1,739.40 on Nov. 9, the highest since Oct. 19, and ended the week up 3.3 percent, the most since Jan. 27. Bullion for immediate delivery gained 0.4 percent to $1,737.30 in London.

Holdings in gold-backed exchange-traded products fell 1.5 metric tons on Nov. 9 from a record 2,596.1 tons the previous day, data compiled by Bloomberg show. Gold prices and ETPs rose this year as central banks from the U.S. to Europe and Asia took steps to bolster economies hurt by Europe’s debt crisis.

“Considering the concern is with the U.S. and it would be bearish for the dollar, gold should outperform as both a currency and a safe haven,” said David Hemming, a portfolio manager at Hermes Investment Management Ltd., which oversees about $2.2 billion in commodities. “Generally, at times of economic uncertainty gold prices do well.”

Silver for December delivery added 0.2 percent to $32.66 an ounce. Platinum for January delivery gained 0.7 percent to $1,571 an ounce. Palladium for December delivery was little changed at $611.80 an ounce.

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