LONDON — Gold steadied at about $1,733 an ounce on Tuesday, following its biggest one-day rise in two weeks, supported by hopes the US will resolve its fiscal problems and by buying in response to the Middle East conflict. Spot gold was up 0.09% at $1,732.96 an ounce by 12.05pm GMT, after rising more than 1% on Monday. US gold traded down 0.06% at $1,733.30. Gold was supported by expectation that US legislators would reach a deal to avert automatic tax hikes and spending cuts in early 2013, which could otherwise trigger another recession. "Gold is acting more like a risk asset," Deutsche Bank analyst Daniel Brebner said, referring to gold’s role as a risky investment, like other commodities, which tend to rise when risks like that posed by the US "fiscal cliff" are averted. However, sometimes gold can act as a safe haven investment, especially in times of great uncertainty. An easing risks related to Greece’s debt crisis underpinned gold prices, Mr Brebner said. Athens approved laws on Monday to enforce budget targets and ensure privatisation proceeds are used to pay off debt, seeking to appease foreign lenders before a critical meeting of euro zone finance ministers. Middle East conflict The conflict between Israel and Hamas in the Gaza Strip supported gold prices due to concern about risks that the violence could spread in the region, stoking worries over inflation through the potential impact on oil prices. "Geopolitical tensions have always had an impact on gold," Ross Norman, chief executive of precious metals trader Sharps Pixley, said. Mr Norman and Mr Brebner saw a potential linkage in oil and gold prices if the Middle East conflict deepened. "If the oil market starts to move considerably higher based on Middle East risks, inflationary pressures would grow, and so gold could be seen as a way to hedge against inflationary pressures," Mr Brebner said. He saw no impact on the gold price from France’s rating downgrade by Moody’s, saying it had been priced into the market. European shares fell and the euro dipped on Tuesday after France lost its top-notch credit rating from Moody’s, reminding investors of the risks from the eurozone debt crisis. Technical analysis suggested spot gold may hover below resistance at $1,738 an ounce for one trading session before breaking this level and rising into a target zone of $1,746-$1,749, according to Reuters market analyst Wang Tao. Indian banks have been asked by the Reserve Bank of India to restrict financing of purchases of gold in the form of bullion, jewellery and coins or units of exchange traded funds, in the latest measure to restrict gold imports to counter a ballooning fiscal deficit. Citi sees gold at $1,749/oz in 2013 Citi expected gold to rise to an average price of $1,749 an ounce in 2013 from 2012’s $1,679, peaking in the first quarter at close to $1,800, as the improving US economy and a stronger dollar limit the upside, it said in a research note. "Gold may see another short-lived bounce in (the first quarter of 2013) from further Fed action to replace the ending OT2 (Operation Twist), but signs of fatigue are increasingly apparent," the report said. The Fed’s Operation Twist stimulus programme extends the maturity of the central bank’s Treasuries holdings in a bid to lower mortgage rates and other long-term borrowing costs. Citi forecast silver to average $31 next year, down from this year’s $31.30, and to further decline to $26.50 in 2014, as the demand picture is expected to remain slow while supply may continue to rise. Spot silver inched up 0.15% to $33.15 an ounce, after rising 2.5% in the previous session. Holdings of the largest gold-backed exchange-traded fund (ETF), New York’s SPDR Gold Trust, fell 0.03% on Monday from Friday, while those of the largest silver-backed ETF, New York’s iShares Silver Trust, fell 0.45% on Friday from Thursday. Platinum inched up 0.04% to $1,571.49, while sister metal palladium was last at $639.72, up 0.43%.

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