* Gold at key chart support near $1,660/oz
* Further losses appear limited for now
* Coming up: U.S. housing starts Wednesday
(New story)
By Frank Tang
NEW YORK, Dec 18 (Reuters) - Gold fell almost 2 percent on
Tuesday to its lowest price since August, hit by heavy technical
selling and growing hopes that U.S. legislators are closer to
reaching a deal that would avert a fiscal crisis next month.
Bullion posted its biggest one-day drop since Nov. 2.
Analysts said that gold is at a turning point held by technical
support at its 200-day moving average and a multi-year rising
trendline near $1,660 an ounce.
"If gold is not able to defend those key supports, one
should expect a new wave of technical selling to continue," said
Adam Sarhan, chief executive of Sarhan Capital.
Spot gold was down 1.9 percent at $1,666.90 an ounce
by 2:02 p.m. EST (2002 GMT).
Earlier in the session, bullion hit $1,661.01, a 3-1/2 month
low for the weakest price since Aug. 31. However, further losses
appeared to be limited for now as it rebounded off its 200-day
moving average.
On charts, Tuesday's drop sent spot gold's relative strength
index (RSI) to 33, near an area below 30 which is traditionally
seen as oversold territory.
U.S. COMEX gold futures settled down $27.50 at
$1,670.70, with volume in line to near its 30-day average,
preliminary Reuters data showed.
Gold, a traditional inflation hedge, had been pressured by
worries that a failure of U.S. legislators and President Barack
Obama to clinch a deal to avert the so-called fiscal cliff of
automatic tax hikes and spending cuts starting in January would
send the U.S. economy back into a recession.
The price of bullion is down in 9 out of the past 11 weeks.
Gold prices are also on track to drop 6 percent for the
quarter to match their worst quarterly performance since the
third quarter of 2008 at the height of the global economic
crisis, marked by the bankruptcy filing of Lehman Brothers.
The metal tumbled as a deal in Washington looked closer as
House of Representatives Speaker John Boehner kept the support
of his Republican colleagues for compromises in talks with the
White House.
U.S. equities and crude oil rallied on the news.
Silver dropped 2 . 4 percent to $31. 49 an ounce.
CHOPPY MARKET
The gold market was particularly choppy as gaps appear to
remain between Democrats and Republicans.
The White House rejected Boehner's backup proposal, saying
it fails to meet Obama's call for a balanced approach and does
not put enough of a tax burden on the wealthiest Americans.
Boehner's concession last week to consider higher tax rates
on the wealthiest Americans -- an idea long fought by his party
-- signalled that a deal was possible before a year-end
deadline.
"You are seeing more confidence in the stock market on hopes
that they are getting very close to getting a deal done, and
that's why some of these assets which are defensive in times of
uncertainty are selling off," said Phillip Streible, senior
commodities broker at futures brokerage R.J. O'Brien.
Among platinum group metals, platinum was down 0.7
percent at $1,590.75 an ounce, while palladium fell 1.5
percent to $686 an ounce.
2:02 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold FEB 1670.70 -27.50 -1.6 1662.00 1704.40 155,445
US Silver MAR 31.669 -0.611 -1.9 31.400 32.600 39,578
US Plat JAN 1593.70 -14.80 -0.9 1590.00 1617.10 11,124
US Pall MAR 690.95 -7.35 -1.1 688.00 703.95 3,434
Gold 1665.90 -31.75 -1.9 1661.78 1702.86
Silver 31.490 -0.770 -2.4 31.380 32.520
Platinum 1590.75 -11.74 -0.7 1592.25 1614.50
Palladium 686.00 -10.47 -1.5 689.25 700.75
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 164,893 186,454 173,331 13.34 0.51
US Silver 42,131 60,369 52,524 20.98 -0.02
US Platinum 16,475 9,882 9,000 18.93 1.45
US Palladium 3,441 6,270 4,783
(Additional reporting by David Brough in London; Editing by
Phil Berlowitz and Grant McCool)