Gold Plummets On U.S. Debt Deal Hopes; Sheds 3.2% For Week
NEW YORK (Oct 12) Gold futures plummeted to end lower for a fourth straight session Friday, after losing much of its sheen as a safe haven asset, with possibilities of a deal in the U.S. government shutdown and debt ceiling limit appearing much brighter. The dollar trended higher against a basket of major currencies, with little other macroeconomic data as catalyst for the precious metal.
For the week, gold prices shed 3.2 percent.
After weeks of lethargy, lawmakers finally seem to make a move toward resolving the fiscal crisis in Washington. A meeting between President Barack Obama and the House Republican leadership seem to have helped change the tone of the debate, with potential of breaking the deadlock.
The Republicans on Thursday had proposed legislation to temporarily raise the nation's debt limit to avoid a default and allow time for negotiations. In a statement after the meeting, the GOP leadership described the talks as "useful and productive" but noted that no final decisions were made.
Gold for December delivery, the most actively traded contract, plunged $28.70 or 2.2 percent to close at $1,268.20 an ounce Friday on the Comex division of the New York Mercantile Exchange.
Gold for December delivery scaled an intraday high of $1,294.80 and a low of $1,259.60 an ounce.
Yesterday, gold extended losses to settle below the $1,300-mark amid hopes of a breakthrough in the budget crisis with possibilities of raising the debt ceiling. Lawmakers in Washington moved toward a resolution to the fiscal crisis, with House Republican leadership proposing legislation to temporarily raise the nation's debt limit.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved down to 896.38 tons from 898.18 tons.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.45 on Friday, up from 80.43 late Thursday in North American trade. The dollar scaled a high of 80.54 intraday and a low of 80.24.
The euro traded higher against the dollar at $1.3543 on Friday, as compared to its previous close of $1.3520 late Thursday in North America. The euro scaled a high of $1.3581 intraday and a low of $1.3519.
In economic news, a Thomson Reuters and University of Michigan report showed U.S. consumer sentiment to have deteriorated in October, reflecting the impact of the ongoing government shutdown. A preliminary reading on the index for October came in at 75.2 compared to the final September reading of 77.5. The index declined for the third consecutive month, at its lowest level since January.
From the eurozone, Germany's EU harmonized inflation stayed unchanged in September as estimated earlier, final figures released by the Federal Statistical Office showed. The harmonized index of consumer prices (HICP) increased 1.6 percent year-on-year in September, which was unchanged from the growth rate seen in August. The September outcome was also in line with the preliminary estimates.
Meanwhile, Germany's wholesale prices declined for the second consecutive month in September, official data showed. Wholesale prices declined 2.2 percent year-on-year in September, which was the biggest fall since November 2009, Destatis said. The decline was faster than the 1.7 percent fall seen in August.
