Roller coaster ride has some way to run yet

The roller coaster ride in the gold market over the past six months has been fuelled by investor worries of a budget crunch in the United States, the threat of rising taxes and cuts in the world's biggest economy.

"Blame it on global economic uncertainty, the US elections and the fiscal cliff. Gold is still the most reliable safe haven," said Pradeep Unni, a senior analyst at the commodity brokerage Richcomm Global Services in Dubai. "The metal is purely moving on headlines, rather than fundamentals."

Spot gold has risen almost 13 per cent since the end of May, trading on Friday at US$1,751.40 an ounce on the Comex. The fiscal cliff - about $600bn (Dh2.2 trillion) worth of spending cuts and taxes increases in January if a deal is not reached between the president and Congress - must be dealt with to avert a potential credit downgrade.

The Standard & Poor's ratings agency stripped its AAA rating on the US last year after it judged that government debt no longer deserved to be considered among the safest assets across the world.

In September, Moody's Investors Service warned it would do the same, if negotiations to avert the fiscal cliff proved successful.

In Europe, finance ministers have been grappling with a worsening sovereign debt crisis.

"Expect a few more spikes in the next two months leading up to the fiscal cliff deadline," said Mr Unni. "Everyone is printing more currency, pushing the value of their currency lower and lower."