Gold rose nearly 1 percent on Wednesday, as economic optimism fueled sharp gains on Wall Street after U.S. lawmakers clinched a last-minute deal to avoid tax hikes that threatened to send the economy back to a recession.
Silver and platinum group metals also rose sharply after the Congress passed a bill to avert immediate austerity measures, as it raised taxes on wealthy individuals and families and preserved certain benefits.
Bullion, however, appears to lack momentum to extend its rally on the first trading day of 2013, analysts said. Signs of stalling growth in Europe and a plan by India to curb gold import could prompt investors to sell.
"I think the reaction is way overdone, and I wouldn't be surprised to see a fairly substantial sell-off that could erase a lot - if not all - of these gains," said Frank McGhee, head precious metals trader at Integrated Brokerage Services.
Spot gold was up 0.8 percent at $1,687.60 an ounce, off a two-week high of $1,694.70 reached earlier in the session.
Gold ended up around 7 percent in 2012 for its 12th straight year of gains, although it recorded a soft final quarter when it fell 5.4 percent, its worst quarterly performance since the third quarter of 2008.
(Read More: Gold May Be Down but Bulls Aren't Counting on It)
Silver rose 2.4 percent to $31.01 an ounce.
Uncertainty remained after the U.S. deal. Spending cuts of $109 billion in military and domestic programs were only delayed for two months, and another fight over the U.S. debt limit looms at that time as well.
U.S. COMEX gold futures for February delivery settled up $13.00 an ounce to $1,688.80 an ounce, with trading volume at around 30 percent below its 30-day average, preliminary Reuters data showed.
However, options turnover in Market Vectors Gold Miners Fund, an exchange-traded fund (ETF) for gold producers, nearly doubled its daily average as investors were buying options ahead of the sector's next move, said WhatsTrading.com options strategist Frederic Ruffy.
Gold rose nearly 1 percent on Wednesday, as economic optimism fueled sharp gains on Wall Street after U.S. lawmakers clinched a last-minute deal to avoid tax hikes that threatened to send the economy back to a
Silver and platinum group metals also rose sharply after the Congress v to avert immediate austerity measures, as it raised taxes on wealthy individuals and families and preserved certain benefits.
Bullion, however, appears to lack momentum to extend its rally on the first trading day of 2013, analysts said. Signs of stalling growth in Europe and a plan by India to curb gold import could prompt gold investors to sell.
"I think the reaction is way overdone, and I wouldn't be surprised to see a fairly substantial sell-off that could erase a lot if not all of these gains," said Frank McGhee, head precious metals trader at Integrated Brokerage Services.
was up 0.8 percent at $1,687.84 an ounce, off a two-week high of $1,694.70 reached earlier in the session.
futures for February delivery rose $13.00 an ounce to $1,688.80 an ounce, with trading volume on track to finish below its 30-day average, preliminary Reuters data showed.
Gold ended up around 7 percent in 2012 for its 12th straight year of gains, although it recorded a soft final quarter when it fell 5.4 percent, its worst quarterly performance since the third quarter of 2008.
Uncertainty remained after the U.S. deal. Spending cuts of $109 billion in military and domestic programs were only delayed for two months, and another fight over the U.S. debt limit looms at that time as well.
Gold is traditionally an inflation hedge and a market that investors rush to in times of trouble, but the metal has lately behaved more like an industrial commodity — rising and falling with the stock market and sometimes even following
2.4 percent to $31.01 an ounce.
