UPDATE: Gold Price Plunges, Democrats "Cocky" Over Fiscal Cliff

UPDATE: 14.20 GMT

The Gold Price plunged $20 an ounce in a matter of minutes at the start of US futures dealing on Wednesday, hitting its lowest level in two weeks, with traders and analysts blaming speculative selling and 'algorithmic' computer-trading programs for the move.

Gold dropped 1.3% in less than five minutes, falling to $1713 an ounce, while silver also fell, dropping 1.6% to $33.31 an ounce.

The move was not appear to be mirrored on stock markets, while the Dollar also moved little during the drop in gold.

EARLIER REPORT

The Gold Price fell to a one-week low below $1735 per ounce Wednesday, as stocks and commodities also edged lower while the Dollar and US Treasuries gained despite ongoing uncertainty over how the US will address its deficit problems.

Silver fell to $33.73 an ounce, also a one-week low.

"We are bullish silver, looking for a retracement back to the $35.35 [an ounce] high from early October," says the latest technical analysis from bullion bank Scotia Mocatta.

Bullion held to back shares in the world's largest gold exchange traded fund SPDR Gold Shares (GLD) rose to a new all-time high yesterday at 1345.8 tonnes.

On the currency markets the US Dollar Index, which measures the Dollar's strength against a basket of other currencies, extended gains this morning despite ongoing uncertainty over the so-called fiscal cliff of tax rises and spending cuts due to kick in at the end of the year.

"I haven't seen any suggestions on what [the Democrats are] going to do on spending," said Republican senator Orrin Hatch Tuesday.

"There's a certain cockiness that I've seen that is really astounding to me since we're basically in the same position we were before."

"I think they feel somewhat emboldened by the election," added Republican Congressman Tom Price.

"How could you not when your president is re-elected after running four straight years of trillion Dollar-plus deficits?"

Senate majority leader Harry Reid, a Democrat, said yesterday he hopes the Republicans can agree to proposed measures to raise additional tax revenue as a way of reducing the federal deficit.

"And as the president's said on a number of occasions, we'll be happy to deal with entitlements," Reid added, though he did not elaborate on where spending cuts might be made.

"If the talks drag on," says today's commodities note from Commerzbank, "this could result in significant increases in the gold price."

The US Treasury meantime did not brand China a currency manipulator Tuesday, contrary to press reports predicting that it would. The Treasury Department did however say the Renminbi "remains significantly undervalued".

Over in Europe, the European Court of Justice, Europe's highest court, yesterday rejected a challenge to the legitimacy of the Eurozone's permanent bailout fund the European Stability Mechanism. 

The ECJ rejected Irish politician Thomas Pringle's argument that the ESM contravenes Article 125 of the European Union Treaty, which states that EU members states "shall not be liable for or assume the commitments...of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project."

"The court has clarified that Eurozone creations such as the ESM and other bailout funds are not an EU fiscal system by the backdoor," says Hugo Brady, analyst at think-tank the Centre for European Reform.

Elsewhere in Europe, the number of unemployed in France rose to its highest level in 14 years last month, official figures published Wednesday show.

French president Francois Hollande warned Tuesday that an ArcelorMittal steelworks in northern France could be nationalized. The company has given the French government a deadline of December 1 to find a buyer for two blast furnaces or it will close the plant, which employs 629 people.

"The president reaffirmed his determination to guarantee permanently the employment at the site," a statement from the Elysée said.

The central bank of South Korea meantime may buy more gold before the end of this year, according to local press reports. Korea added 16 tonnes to its gold reserves in June, on top of the 40 tonnes it bought last year, according to data published by the World Gold Council.