Gold ends near one-week high on Senate deal
CHICAGO (Oct 16) Gold futures closed near a one-week high on Wednesday after U.S. senators reached a deal to end the government shutdown and raise the nation’s debt limit.
Gold for December delivery climbed $9.10, or 0.7%, to settle at $1,282.30 an ounce on the Comex division of the New York Mercantile Exchange after slipping 0.3% on Tuesday. That was the highest settlement price since Oct. 10, according to FactSet data.
December silver rose 17 cents, or 0.8%, to $21.37 an ounce, following a loss of 0.8% a day earlier
Gold prices saw the bulk of their gains
Wednesday afternoon, buoyed by the “gold market’s confidence that the global economy will not experience a negative shock from a U.S. debt default,” said Jason Rotman, president of Lido Isle Advisors. “This global growth could potentially further drive demand for the precious metal, especially at these levels below $1,300.”
However, the latest Federal Reserve survey released Wednesday showed that about a third of the country was experiencing slower growth in September and early October. The survey, also known as the Beige Book, was released shortly after gold trading closed on Comex.
Gold climbed on Comex despite some strength in the U.S. dollar, “which is unconventional” and shows that gold may be at oversold levels, Rotman said. The dollar index rose on the back of hopes for an end to the government shutdown and debt-ceiling issue, then pulled back.
U.S. senators announced a deal Wednesday that would finance the government until Jan. 15 and raise the borrowing limited until Feb. 7, with lawmakers required to hammer out a long-term budget plan by Dec. 13. The Senate and House still need to vote on the agreement.
Media reports said House Speaker John Boehner will bring to the floor whatever bill the Senate passes to open the government and lift the U.S. debt ceiling.
If the U.S. Senate extends the borrowing limit until February and funds the government through mid-January, as has been reported, “the uncertainty will thus continue for the foreseeable future, although risk assets could nonetheless benefit from a relief rally,” said Fawad Razaqzada, technical analyst at GFT Markets.
A temporary fix would also imply the Federal Reserve may hold off tapering quantitative easing for another few months at the very least, which should give risk assets a further boost, Razaqzada said in daily commentary.
