Gold up 2.4 pct on gov't shutdown, jobs data below forecasts
CHICAGO (Oct 2) Gold rose more than 2 percent on Wednesday, recouping most of the previous session's tumble, as a drop in the dollar and weak U.S. equities sparked bargain hunting in the precious metal. Bullion accelerated gains after data showed U.S. private employers added fewer-than-expected jobs in September, according to data from payrolls processor ADP, underscoring steady but still sluggish growth in the labor market.
A partial government shutdown in Washington entered a second day, adding to concerns over how soon a political compromise would be reached. The Congress must also agree to raise the debt limit in coming weeks or risk a default that could roil global markets. "The market is jittery because of the government shutdown.
If the economy numbers continue to be weaker than expected, we may see a slide in the dollar, and money in equities flow back into Treasuries and metals for the time being," said Tom Power, senior commodities trader at futures brokerage R.J. O'Brien. In a reversal of Tuesday's market, the S&P 500 index fell while safe havens, such as U.S. Treasuries and gold rose. Spot gold was up 2.4 percent to $1,316.29 an ounce at noon EDT (1600 GMT), having earlier risen almost 3 percent to $1,322.21 an ounce. U.S. gold futures for December delivery rose $31 to $1,317.10 an ounce, with volume on track to exceed its 30-day average, preliminary Reuters data showed.
Gold's inflation-hedge appeal was boosted after the European Central Bank's chief said the ECB is watching moves in market interest rates closely and is ready to use any policy option to temper them if needed. Bullion's safe-haven status is usually burnished by economic uncertainty and geopolitical tension. Prolonged U.S. budget talks could lift gold's prices, as this maintains pressure on the Federal Reserve to keep its monetary stimulus for an extended period of time.
On Tuesday, bullion posted its biggest daily percentage drop in more than two weeks, following a big Comex sell order and technical selling once prices fell below $1,300 an ounce. The sharp slide in the previous session stirred market talk of forced liquidation by a distressed commodities fund and of selling related to a fund rebalancing on the first day of the fourth quarter, although the talk could not be confirmed. Among other precious metals, silver rose 3.3 percent to $21.80 an ounce. Platinum was up 1 percent to $1,387.74 an ounce and palladium gained 0.3 percent to $717.31 an ounce. The platinum group metals market now focuses on Thursday's talks to seek an end to a strike that has brought most of the operations of South Africa's Anglo American Platinum to a standstill for nearly one week.
