Gold slips from 2-week peak after U.S. budget deal

 Gold eased on Thursday from the prior session's two-week peak as the dollar strengthened and oil prices fell, with investors focusing on coming U.S. budget talks after euphoria over a vote to avert a fiscal crisis faded.
A global stock market rally petered out on Thursday as investors began worrying about likely future U.S. political battles over spending cuts.
Spot gold was at $1,681.1 by 1114 GMT, down 0.31 percent, having touched a two-week peak above $1,694 in the previous session. U.S. gold futures for December delivery were down $7.0 an ounce at $1,681.80.
The precious metal made a strong start to the year along with other financial assets, with commodities hitting multi-week highs on Wednesday, after the U.S. Congress passed a bill to avert an approaching fiscal crisis.
Lawmakers opted to raise taxes on wealthy individuals and families, but left unresolved another sticky issue involving $109 billion in planned spending cuts, promising more political showdowns on the budget in coming months.
"The deal to avoid a fiscal cliff has booted some problems into the long grass by a considerable distance, but there are still issues out there such as expanding the debt ceiling, which could prove to be difficult negotiations," said David Jollie, strategic analyst at Mitsui Precious Metals.
He said that gold had been swept up in a relief rally of financial assets and commodities after the deal to avert the fiscal cliff, but that this had lost momentum on Thursday.
The euro fell more than one percent against the yen as investors booked profits and sold riskier and growth-linked currencies on concerns about the prospect of more U.S. budget negotiations in coming weeks.
Technical analysts at ScotiaMocatta said gold's rise back above a key retracement level at $1,695 an ounce on Wednesday had led to an improved chart picture for the metal.
"The break of $1,685 has shifted our view from bearish to neutral," they said. "(We) see support now at $1,679 and $1,670, with resistance at $1,695 and $1,708."
GRAPHICS
2012 asset returns: http://link.reuters.com/muc46s
2012 commod returns: http://link.reuters.com/faz36s
Gold across currencies: http://r.reuters.com/wun62s
Gold/platinum ratio: http://link.reuters.com/xez92s
Plat/palladium ratio: http://link.reuters.com/qub87s
HEADWINDS FOR GOLD
Gold ended up around 7 percent in 2012, the twelfth straight year of gains, but faces headwinds this year after posting its worst quarterly performance in more than four years in the last three months of 2012.
Bank Credit Suisse cut its gold price forecasts for 2013 to $1,740 an ounce on Thursday from $1,840 previously, and said in a report that the end of the bull market was in sight.
"A more stable financial environment and improving global growth is likely to see investor demand for defensive assets fade and the market turn lower by Q4," it said. "We do not forecast a bursting bubble collapse in price, more a slow puncture."
Premiums for gold bars were steady in Singapore at $1.10 to$1.20 an ounce to the spot London prices as supply had yet to recover after the Christmas and New Year holidays. Buyers from India, historically the top consumer, were on the sidelines.
India's finance minister said on Tuesday he was looking at further curbs on gold imports to help rein in a current account gap that touched an all-time high in the July-September quarter.
"Physical gold demand may be negatively affected in the next few months by the fact that the Indian government is considering raising duties on gold imports even further," Commerzbank said in a note.
"The aim is to tackle the country's record-high current account deficit, for which - according to India's central bank - gold imports are roughly 80 percent to blame."
The Istanbul Gold Exchange reported on Thursday that Turkey's gold imports rose by 57 percent last year to 120.78 tonnes from 79.7 tonnes in 2011.
Among other precious metals, silver was down 0.16 percent to $30.92 an ounce, while platinum firmed 0.11 percent to $1,562.24 and palladium dipped 0.20 percent to $700.97 an ounce.

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Sensex gains for third day; Q3 earnings key

 BSE Sensex edgedup on Thursday, marking a third consecutive session of gains that pushed indexes to their highest close in two years, as expectations for better-than-expected quarterly earnings lifted technology stocks such as Infosys.

Shares have started 2013 on a strong note as investors bet the Reserve Bank of India (RBI) will cutinterest rates later this month, and as the resolution to the so-called U.S. "fiscal cliff" negotiations have benefitted global markets.

Foreign investors have also bought a net 19.25 billion rupees in equities this year, according to provisional exchange and regulatory data, after buying a net $24.37 billion last year.

However, analysts say 2013 would be a lot different from 2012, which saw a 25.7 percent gain in the benchmark index, as budget problems in the U.S. are far from over, while at home the fiscal defict poses a challenge for a meaningful reduction in interest rates.

"Market is in a wait-and-watch mode because U.S. problems are just postponed and not solved as discussion regarding debt limit will come back," said Jagannadham Thunuguntla, head of Research at SMC Investmensts and Advisors.

Earnings growth in 2013 will largely depend on the central bank's stance on rates and government policy measures, he added.

The benchmark BSE index rose 0.26 percent, or 50.54 points, to end at 19,764.78, marking its highest close since January 6, 2011.

The broader NSE index rose 0.27 percent, or 16.25 points, to end at 6,009.50, its highest close since January 6, 2011, and ending above the psychologically key level of 6,000 points.

Indian companies are due to start reporting earnings next week, with Infosys Ltd kicking off on January 11.

Hopes that software service exporters would report solid earnings were amplified by expectations an agreement on the U.S. fiscal cliff would improve demand from the key U.S. market.

Infosys gained 1.24 percent, Tata Consultancy Services Ltd rose 1.4 percent, while Wipro Ltd ended up 1 percent.

Jet Airways gained 4.7 percent after a Indian government source told reporters the carrier was the front-runner for an investment from Etihad Airways.

Jet later confirmed it was in talks with Etihad, in the first confirmation of a potential deal by either side.

SpiceJet Ltd gained 1 percent on hopes the carrier would also eventually attract foreign investment, but Kingfisher Airlines fell 2.

India's Dr. Reddy's Laboratories Ltd gained 2.4 percent after the company said it has launched prostate drug finasteride tablets in the U.S.

Shares in gold loan providers rallied after a central bank report proposed increasing the loan-to-value, or LTV, ratio to 75 percent from 60 percent currently.

Muthoot Finance shares ended up 9.7 percent, while Manappuram Finance closed 20 percent higher at the maximun daily limit.

However, shares in Titan Industries , which makes gold jewellery, ended down 1.75 percent on concerns over rising costs after the government said it will make importing gold costlier.

Shares in India's biggest domestic iron ore producer, state-run NMDC Ltd, fell 3.22 percent after reducing prices for its most common grade by almost 6 percent a tonne in January, an unexpected move that will help cut the costs of steel makers who rely on imports.

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Wall Street dips as profits booked after rally

NEW YORK (Reuters) - U.S. stocks edged lower on Thursday as investors locked in gains after a rally Wednesday, which was spurred by a deal by U.S. lawmakers to avert a "fiscal cliff" of austerity measures that had been due to kick in this year.
Losses were limited, however, by better-than-expected data that showed U.S. private-sector employers added 215,000 jobs in December. That was well above economists' expectations for a gain of 133,000 jobs, according to a Reuters survey.
"The report now sets the stage as we expect a strong non-farm payroll reading on Friday," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York
The ADP report beat forecasts partly due to "a snapback from (superstorm) Sandy, although we prefer to stick to our line of thought that says the economy is gaining momentum rather than losing it regardless of the impact of fiscal talks in Washington," he said.
The key payrolls report is due on Friday. A Reuters survey forecasts non-farm payrolls rose to 150,000 last month, from 146,000 in November.
A separate report Thursday showed the number of Americans filing new claims for unemployment benefits rose last week, but the data was too distorted by year-end holidays to offer a clear read of labor market conditions.
The Dow Jones industrial average was down 45.92 points, or 0.34 percent, at 13,366.63. The Standard & Poor's 500 Index was down 3.62 points, or 0.25 percent, at 1,458.80. The Nasdaq Composite Index was down 8.15 points, or 0.26 percent, at 3,104.11.
Wall Street began the new year Wednesday with a rally and their best performance in more than a year, sparked by a last-minute deal in Washington to avert a fiscal cliff of automatic massive tax hikes and spending cuts that, in the worst-case scenario, would have hurt the nation's economic growth.
The minutes of the Federal Reserve's policy meeting last month will be released at 2:00 p.m. EST (1900 GMT). The minutes will give details on the discussions of the Federal Open Market Committee's December 11-12 meeting.
U.S. retailer Costco Wholesale Corp reported a better-than-expected 9 percent rise in December sales at stores open at least a year, mainly helped by an additional sales day in the reporting period. Costco shares rose 1.3 percent to $102.80.
Gap Inc will buy women's fashion boutique Intermix Inc for $130 million to enter the luxury clothes market, the Wall Street Journal reported. The stock rose 3 percent to $32.28.
Family Dollar Stores Inc reported a lower-than-expected quarterly profit as its emphasis on selling more everyday items like cigarettes and soft drinks put pressure on margins. The stock fell 12 percent to $56.47.

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Myanmar launches air-strikes on Kachin rebels

Heavy fighting between the Myanmar Army and the rebel Kachin Independence Army (KIA), is raising concern that a major escalation of violence is under way in the region, casting a shadow over Myanmar's much-touted reforms.
The Myanmar Army offensive – which includes the use of helicopter gunships and fighter jets – comes after weeks of heavy fighting at outposts about 10 miles outside the KIA headquarters on the Myanmar-China frontier.
The government of Myanmar (also known as Burma) and the KIA signed a cease-fire in 1994, but that came apart in June 2011, even as the government embarked on reforms that include tentative cease-fires with some of the myriad other ethnic minority armed groups that have long fought in the border regions.
With peace talks between the government and KIA stalled, President Thein Sein has told the Army only to fight in self-defense in Kachin, but the latest violence could signal that this request has been rescinded, or that the reformist president is being ignored by the Army.
“The situation is very tense. The bombers are bombing just about four or five miles from the town here,” says Joseph Nbwi Naw, a Kachin Catholic priest in the KIA headquarters Laiza, a valley town separated from Yunnan, China, only by the 1-ft. deep, 20-yard-wide Jeyang River.
“People are digging trenches and foxholes in the town,” says La Nan, KIA spokesperson.
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Ethnic groups in the northern part of the country have long accused the government of repression, and have been fighting for greater autonomy.
The Kachin – supported by a smaller militia known as the All Burma Students Democratic Front – countered a Myanmar Army attempt to resupply soldiers near the front line Dec. 14, by overrunning an Army position near a Buddhist temple on the main road from Laiza to Myitkina, the government-held state capital of the Kachin region – upping the ante in a grueling 18-month war.
Since the fighting ramped up in mid December, at least one civilian and an unverifiable numbers of soldier militia members have died.
La Nan told the Monitor Wednesday that “our people in Pangwa say that the Burmese jets flew 1 kilometer into China yesterday before attacking us,” echoing claims posted online alongside numerous video clips of Myanmar helicopters and jets attacking KIA positions and flying over camps set up for some of the around 100,000 civilians made homeless by the fighting.
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The Myanmar government first denied and then acknowledged that the Army is carrying out the airstrikes, after accusing the KIA of attacking power stations during the Christmas holidays. All told, the KIA carried out “101 mine attacks in Kachin State and from 18 May 2011 to 21 December 2012,” according to the government mouthpiece The New Light of Myanmar, implying that the government considers the attacks a reaction to rebel attacks.
Questions about the latest fighting sent to the Myanmar president's office had gone unanswered at time of writing, but a report on the government's Myawaddy news said that the Army seized a rebel outpost on Dec. 30 "with the help of air strikes in the region."
Kachin is the northernmost state in Myanmar and is a mountainous and resource-rich region known for its jade. Fighting has centered around lucrative mines near the town of Hpakant in recent months.
The KIA was set up in 1961 after the government reneged on promises to devolve powers to the Kachin and other ethnic groups, as a military junta seized power at the start of what turned out to be five decades of Army rule.
The estimated 1 million Kachin are mostly Baptist Christian, in a country of almost 60 million where close to 90 percent of people are thought to be Buddhist and some 70 percent are Burman, the majority ethnic group.
The KIA, once accused of part-funding operations through opium cultivation, has an estimated 10,000 soldiers but is mostly armed with light weaponry, while the 400,000 Myanmar Army is among the best-equipped in southeast Asia, with a long history of brutality in the hill and jungle ethnic minority borderlands.
Nlam Bok Mai, a Kachin mother who is among more than 7,000 people living in cramped shacks in Jeyang camp outside Laiza, told the Monitor that she fled with her family in June 2011 as the Myanmar Army approached their village, 25 miles away: “We did not wait there for the Army to come, we did not want to get caught in any fighting.

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Egypt's Brotherhood says UAE arrests unfounded

CAIRO (Reuters) - Egypt's Muslim Brotherhood said on Wednesday some of its members had been wrongfully arrested in United Arab Emirates (UAE) on allegations of helping to train local Islamists in subversion tactics.
"I know 11 people were detained. I know that some of them are from the Brotherhood," said Mahmoud Ghozlan, a Brotherhood spokesman in Cairo. "The claim that they are a cell seeking to destabilize the country is devoid of truth."
The arrests came to light on Tuesday when a UAE newspaper reported the authorities had arrested an "Egyptian Muslim Brotherhood cell", citing an unnamed source.
The oil-rich UAE, which has long voiced distrust of the Muslim Brotherhood that helped propel Egyptian President Mohamed Mursi to power this year, arrested about 60 Islamists last month, accusing them of being linked to the Egyptian group and plotting to undermine governments in the Gulf region.
In what appeared to be an effort to ease tensions, Egypt's intelligence chief, General Mohamed Shehata, headed to the UAE for talks, airport officials said.
An aide to the Egyptian president also handed over a message from Mursi to UAE's president, a statement from the Egyptian presidency said, without giving details.
"We are in contact with the authorities there and will see what will happen in the next period," Foreign Minister Mohamed Kamel Amr was quoted as saying by the state news agency.
The son of one of the arrested Egyptians said in Cairo that his father, Ali Sonbol, is a medical doctor and is not involved in political activities.
"They didn't say where they were taking him and what were the charges," Ahmed Sonbol told Reuters. "The Egyptian embassy only assured us that he was detained by UAE authorities and he is well."
UAE officials were not available for comment.
Relations between Egypt and the UAE soured after Egyptian strongman Hosni Mubarak - a longtime Gulf ally - was toppled in Egypt's 2011 revolution.
Last month, UAE Foreign Minister Sheikh Abdullah bin Zayed al-Nahayan summoned Egypt's ambassador over claims carried by Egyptian media the UAE was behind a plot against Egypt's leadership, saying they were "fabricated".
Thanks to their state-sponsored cradle-to-grave welfare systems, the UAE and other Gulf Arab monarchies have largely avoided the Arab Spring unrest which has unseated long-serving rulers elsewhere in the past two years.
The Brotherhood has sought to reassure Gulf states it has no plan to push for political change beyond Egypt's borders.

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5 female teachers killed: Pakistan aid work imperiled

Pakistani police on Wednesday searched for the gunmen behind the brazen murder of five teachers and two health workers, amid fears that public health campaigns would suffer and lead to a resurgence of polio and other preventable diseases.
There was no immediate claim of responsibility for the attack, which occurred Tuesday in Swabi, a city in the troubled northwest. The Pakistani Taliban has in the past vowed to target, among others, health workers involved in campaigns to wipe out polio.
Last year, 15 health and aid workers were killed in Pakistan, making the country one of the most dangerous in the world for aid workers, according to the British-based consultancy Humanitarian Outcomes. Most were women. Development sector experts now express concerns that those working on the ground will shy away from assignments.
“In the past, local volunteers, be they teachers, medical workers or social mobilizers, considered themselves safe and worked hand in hand with foreign aid workers and paramilitary personnel in even the most dire of circumstances,” says Hassan Belal Zaidi, a development and communication specialist, based in Islamabad. “But now, it would not be unreasonable for them to think twice and even refuse to travel to remote parts of the country if they know there is a chance they may get shot.”
The six women and one man were traveling in a van when gunmen on motorcycles stopped it Tuesday afternoon after it left a children's community center, according to Abdur Rasheed Khan, chief of the Swabi police force. The four gunmen took a 4-year-old boy belonging to one of the women from the van, and then raked the vehicle with gunfire, he said. The child was unharmed and was later turned over to police by bystanders, he said.
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These murders come a few weeks after nine health workers with national polio campaign were killed in different parts of the country in what police said was a coordinated attack. That prompted the Pakistani government and the United Nations agencies to suspend their vaccination drive for the disease, which has seen a uptick in cases in recent years.
Pakistan is one out of the three countries where polio persists; at least 57 cases were registered in 2012. The World Health Organization last year warned Pakistan that it could face travel and visa restrictions and sanctions imposed by other countries if polio continues to spread.
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Distrust of public health initiatives like the polio campaign is particularly strong in districts of Pakistan where religious extremists have tightened their grip. That sentiment deepened in 2011 after the US raid that killed Osama bin Laden. A CIA-led operation to confirm Mr. bin Laden’s location in the city of Abbottabad used a hepatitis B vaccination campaign to gather DNA evidence on bin Laden.
The recent attacks are likely to further frighten people from working with foreign and Pakistani aid and development organizations, says Bushra Arain, chairwoman for the All Pakistan Lady Health Workers Welfare Association, which counts more than 100,000 registered members.
“We are the backbone of Pakistani health sector. If the attacks continue, with the state showing the inability it currently is demonstrating in stopping us from being targeted, we will stop working,” Ms. Arain says.
The Taliban and affiliated groups are targeting aid workers for several reasons, says Khadim Hussain, who heads one of the largest private charity school networks in the northwestern Khyber Pakhtunkhwa province. First, the militants think aid groups have an anti-Muslim agenda, spying on the local population, a suspicion that was deepened by the raid on bin Laden. Secondly, the groups equate health campaigns with modernizing society, in opposition to some fundamentalist tenets for Islamic radicals. Some groups also believe the vaccine is intended to sterilize Muslim children.
“If the attacks by the Taliban continue, there will be widespread de-motivation amongst aid workers, which I am already witnessing,” Mr. Hussain says.
While some development advocates say there needs to be a coordinated, public response by Pakistani and foreign NGOs to the attacks, others say the government should stop public education campaigns altogether and just allow aid workers to operate quietly.
“The less attention we get, the less vulnerable we will be as targets for the terrorists,” Ms. Arain says.
“We are involved with anti-polio drive, infant health awareness programs, family planning, etc. and if the government does not pull its act together, many deadly diseases can spread rapidly in Pakistan,” she says. “The situation can get out of hand.

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Gunmen kidnap seven Pakistani soldiers

ISLAMABAD (Reuters) - Gunmen kidnapped seven soldiers from a bus in Pakistan on Wednesday, military officials said, just days after Taliban forces executed 21 pro-government paramilitaries they had seized.
The gunmen took the seven soldiers and let go a sweeper on the bus with them, one military official said. The gunmen were wearing military uniforms, other sources said.
The men were travelling between army headquarters in Rawalpindi and their stations in the northern province of Khyber Pakhtunkhwa when they were taken off their bus in Jand in Punjab province.
Taliban commander Tariq Afridi, who has forces in the area, was not available for comment and no Taliban spokesman returned calls seeking comment.
Last week the Taliban kidnapped 23 paramilitary pro-government forces. Twenty-one of their bodies, bound, blindfolded and shot in the head, were discovered on Sunday. One man escaped and another was badly wounded.
A military offensive over the past two years has clawed back swathes of Pakistan from the Taliban.
But the insurgents are still able to organize kidnaps and killings over wide swathes of the country and high-profile attacks have increased over the past month. Elections are scheduled for the spring and the insurgency will be a key issue.
Poorly trained police, overburdened courts and corruption have hampered Pakistan's ability to crack down on militancy.
On Monday, the bullet-riddled bodies of nine men were found in North Waziristan, local tribesmen said. A Taliban spokesman claimed they were fighters that had been taken prisoner over the past few months. Military officials did not return calls seeking comment.
In August, the Taliban kidnapped 17 soldiers and beheaded them.

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