Gold settles near $1,340; Dollar slumps on US fiscal worries

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Gold settled more than 1 percent higher on Friday as wrangling over the U.S. budget and jitters over the outlook for Federal Reserve policy stoked buying interest, with buying accelerating sharply on a break of a key chart level.

U.S. gold futures jumped to a high of $1,345.20 an ounce, up 1.6 percent, after breaking through the 100-day moving average at $1,341 an ounce, a level it slid below last Friday when prices crashed 2.9 percent.

"There were some stops above there, and equity futures are weaker because people are concerned about the political situation in the U.S. and the prospect of another fiscal cliff," Simon Weeks, head of precious metals at ScotiaMocatta, said. "That's driving it at the moment."

Chart: Precious Metals

Spot gold last rose 1.2 percent to $1,339 an ounce, while U.S. gold futures for December delivery settled 1.1 percent higher at $1,339 an ounce.

Concern over budget and debt negotiations in Washington sent the dollar close to a seven-month low and pressured world equities on Friday.

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