Canada's S&P/TSX index opened lower as gold prices tumbled below the psychologically important $1,700 (U.S.) an ounce support level. U.S. indexes were mixed.
The February gold futures contract on the Comex division of the New York Mercantile Exchange was down $25.40, or 1.5 per cent, at $1,695.40 (U.S.) an ounce. That's a four-week low and losses were tied mostly to technical selling. Silver is also under pressure, with the March contract down 2.3 per cent at $32.97 (U.S.) an ounce. Crude oil was down just over 1 per cent.
In early trading, Canada's main index was down 35 points, or 0.2 per cent, at 12,133, but had been down more than 70 points just after the open. With the drop in commodity prices, the materials sector is the worst performer on the TSX, down 1.4 per cent.
The S&P 500 was down about one point at 1,408, and the Dow Jones industrial average was up 12 points, or 0.09 per cent, at 12,977.
Worries over the U.S. fiscal cliff continue to dominate markets. On Monday, the Democrats rejected a Republican proposal for averting the more than $600-billion (U.S.) in spending cuts and tax increases set to take hold Jan. 1 that threaten to slow economic growth in the world's biggest economy.
House Speaker John Boehner offered $1.4-trillion in spending cuts and $800-billion in new revenue by limiting tax breaks and reducing deductions. President Barack Obama has proposed $1.6-trillion in tax increases and $600-billion in spending cuts.
While the two sides are clearly far apart in their negotiations, most on the Street believe a deal of some kind will eventually materialise. But Washington's penchant for brinkmanship is creating enough uncertainty to keep markets on edge.
Those who set monetary policy are also worried. Australia's central bank cited the fiscal cliff as one of several factors that pose risks for its economy as it announced a one-quarter point cut in its benchmark lending rate today.
The Bank of Canada didn't make any adjustments to interest rates here this morning, but cited the fiscal cliff as one of the threats to the global economy. It also suggested the next move on interest rates in Canada, whenever that comes, will be up.
The Canadian dollar is up nearly one-fifth of a cent at 1.0070 per U.S., slightly firmer than before the bank's interest rate announcement.
Bank of Montreal is up a modest 0.3 per cent after its fourth-quarter earnings beat Street expectations. Adjusted to exclude one-time items, BMO made $1.65 a share, easily surpassing analysts' forecasts for $1.42 a share.