Gold Swings Above 3-Month Low as Talks Resume on Debt Impasse
LONDON (Oct 16) Gold swung between gains and losses above a three-month low in London as Senate leaders resumed talks to avoid a U.S. default and end a partial government shutdown.
U.S. Senate leaders are rushing to lock down an agreement to end the fiscal impasse, stepping in after House Republicans’ last-minute plan to avert a government default collapsed. The emerging Senate accord may be announced as early as today. With the U.S. borrowing authority due to lapse tomorrow, Fitch Ratings put the world’s biggest economy on watch for a possible credit downgrade, citing lawmakers’ inability to reach a deal.
Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on speculation the Federal Reserve will slow debt purchases. The government shutdown that began Oct. 1 may have already hurt the economy. Data showed yesterday the Fed Bank of New York’s general economic index fell to a five-month low in October.
“The U.S. situation continues, with lots of talking and very little action,” David Govett, head of precious metals at Marex Spectron Group in London, wrote today in a report. “Overnight, a quiet session has seen prices remain supported and with the situation unchanged in Congress, we should stay that way. Most people will stay on the sidelines now if they have any sense until things are resolved.”
Gold Price
Gold for immediate delivery fell 0.2 percent to $1,279.28 an ounce by 9:22 a.m. in London. It rose and fell as much as 0.6 percent today after reaching $1,251.85 yesterday, the lowest since July 10. Bullion for December delivery gained 0.4 percent to $1,278.30 an ounce on the Comex in New York. Futures trading volume was 16 percent below average for the past 100 days for this time of day, data compiled by Bloomberg showed.
An emerging agreement would fund the U.S. government through Jan. 15, and suspend the debt ceiling through Feb. 7. The Treasury Department could use so-called extraordinary measures to delay default for about another month beyond that, said a Senate Democratic aide.
“History suggests that politicians will pull back from the abyss,” Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in an e-mailed note today. “Investors appear content to take a wait-and-see attitude to this situation.”
Gold holdings in exchange-traded products dropped 1.9 metric tons to 1,906.2 tons yesterday, the lowest since May 2010, data compiled by Bloomberg show.
Silver for immediate delivery lost 0.8 percent to $21.1945 an ounce in London. It reached $20.5088 yesterday, the lowest since Aug. 9. Palladium fell 0.2 percent to $706.20 an ounce. Platinum was little changed at $1,385.30 an ounce, after touching $1,359.59 yesterday, the lowest since July 10.
