* Geopolitical tension simmers after Israeli strike on Hamas
* Markets digest Obama’s update on “fiscal cliff”
* Coming up: U.S. CPI, NY, Philly manufacturing indexes Thurs.
By Frank Tang
NEW YORK, Nov 14 (Reuters) – Gold prices rose on Wednesday on crude oil’s gains amid rising geopolitical tension in the Middle East, and traders continued to focus on how the United States can avoid a debilitating fiscal crisis at the end of the year.
News that Israel killed the military commander of the Palestinian group Hamas in a missile strike on the Gaza Strip triggered safe-haven demand, while scenes of violent anti-austerity strikes in Spain and Italy prompted investors to buy gold as a hedge against economic uncertainty.
Bullion investors are digesting comments by President Barack Obama to address the fiscal crisis. He said tax hikes on the middle class could result in a recession if lawmakers fail to agree on the tax and spending issues associated with the “fiscal cliff” by year-end deadlines.
“Our short-term outlook continues to call for further gains in gold, but we would not be surprised by a rather substantial correction once a fiscal-cliff agreement is reached,” said Edward Meir, a metal analyst at futures brokerage INTL FCStone.
The market largely ignored minutes from the latest Federal policy meeting in October, which showed that a number of Fed officials thought the U.S. central bank would need to step up asset purchases next year to fill the gap when the Operation Twist program expires.
Spot gold edged down 43 cents to $1,724.46 an ounce by 3:09 PM EST (2009 GMT), pressured by a 1 percent drop on Wall Street late in the session.
U.S. COMEX gold futures for December delivery settled up $5.30 at $1,730.10, with trading volume about 30 percent below its 250-day average, preliminary Reuters data showed. A more than 1 percent gain in Brent crude futures after the Israeli air strike and higher grain prices lifted gold.
The latest attacks marked the biggest escalation between Israel and Gaza militants since a 2008-2009 conflict, and appear to be pushing the two sides to the brink of a new war.
Gold prices had been pressured earlier after data showed U.S. retail sales fell in October for the first time in three months as Superstorm Sandy slammed the brakes on automobile purchases, suggesting a loss of momentum in spending early in the fourth quarter.
Silver rose 0.4 percent to $32.60 an ounce.
U.S. FISCAL CRISIS REMAINS FOCUS
The impending fiscal cliff preoccupied investors who pondered how long Washington will take to reach a compromise and avoid a series of mandated tax increases and spending cuts to be triggered early next year that could send the world’s largest economy back into recession.
Gold could fall if the metal underperforms the U.S. dollar as a safe haven in a liquidity-driven risk event such as the fiscal crisis, said Daniel Brebner, an analyst with Deutsche Bank.
Platinum group metals were higher for a second day, rallying on a bullish forecast that production outages earlier this year could result in a supply deficit.
Platinum climbed to $1,597.50, its strongest performance since Oct. 23, and later was up 75 cents at $1,581.50.
Palladium hit a session high of $647.22, its strongest since Oct. 18. It was last up 0.4 percent at $635.47 for the day.
Source: Reuters
