Gold rises as Fitch considers US downgrade amid shutdown
SINGAPORE (Oct 16) Prices of gold traded in positive territory during Asian trading hours on Wednesday as Fitch Ratings is considering cutting the US rating amid persisting government stalemate in the country.
Gold futures for December delivery rose 0.47% to $1,279.80 an ounce at the time of writing. Silver performed in line with its yellow peer, growing 0.46% to $21.290 an ounce.
Gold is heading towards its first annual loss since 2000. The precious metal has lost around 24% since the beginning of this year, as it was hit first by a massive sell-out in April then sought incentives later this year amid the fog surrounding the US Federal Reserve's (Fed) easing policy. During the two days from April 12 to 15 it lost 13%, experiencing its steepest fall in 30 years, plummeting to a level seen almost three years back. Later in the year, uncertainties in the US, tied with speculation over the Fed's easing policy tapering, weighed on market sentiment.
Holdings in the SPDR gold trust, which is the world's biggest bullion-backed exchange-traded product, fell to 889.13 tons. It is the lowest reading since February 2009. The gold trust has lost about 17 tons since the beginning of the shutdown, and showing a 15-ton decline in the whole of September.
Fitch: US debt under scrutiny
Fitch Ratings, one of three major rating agencies and the only one that still has a AAA rating for the US, placed US Treasury bonds rating as negative in what could be viewed as a precursor to a cut of the US sovereign debt rating.
"The prolonged negotiations over raising the debt ceiling...risks undermining confidence in the role of the US dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the US. This `faith' is a key reason why the US 'AAA' rating can tolerate a substantially higher level of public debt than other AAA bonds," said Fitch in a statement.
Day 16, still no deal
The GOP presented its own proposal for a debt-ceiling crisis solution, with Democrat Harry Reid calling the proposal a 'blatant attack' on bipartnership.
Talks between Reid and his counterpart Republican Mitch McConnell had broken down.
A House proposal would reopen the US government until January 15 and hike the nation's debt limit to February 7. Reid stated that the House plan could not pass the Senate.
Any agreement coming from the Senate has to be approved by the House and signed by President Barack Obama.
The Treasury Department warned that the country's debt ceiling must be lifted by Thursday, October 17, or the US government will lose the ability to borrow money, adding that the Treasury will still have some money in cash to pay incoming bills.
