Gold higher, erases previous losses as US Congress remains divided
NEW YORK (Oct 80 Gold futures were traded in green on Tuesday, although they have kept a rising trend since the beginning of October, driven by the continued dispute over the US budget balance and analysts expectations that the Federal Reserve (Fed) will put off the tapering of its quantitative easing program.
Gold futures for December delivery were 0.21% up at $1,327.70 an ounce, while silver rose 0.22% to $22.43 an ounce at the time of writing.
"As there is still no sign of the dispute being resolved, market players will remain unsettled and interest in gold as a safe haven and crisis currency should increase. Moreover, the Fed will probably postpone its retreat from quantitative easing, which could also help to push prices up," analysts at Commerzbank said.
Gold prices were rising during July and August, driven by fears emanating from the conflict in Syria, which posed a threat to oil supplies.
Moreover, given the quotas imposed, some Chinese banks might have be banned from new purchases of the yellow metal as purchases jumped by 89% in the first seven months from a year ago.
By contrast, India's gold demand could rise by more than 15% in the fourth quarter up to 300 tonnes year-on-year, on account of a good monsoon and 20% more auspicious days this festival season, according to the World Gold Council (WGC).
US default threat
The partial government shutdown in the world's largest economy continues and entered a second week, with many investors expecting there will be no agreement between Democrats and Republicans anytime this week.
Meanwhile, US lawmakers have nine more days to resolve the debt-limit issue (October 17), when the ceiling of the country's borrowing capacity is likely to be exhausted.
Several media reported that US lawmakers began taking the first steps towards raising the nation's debt ceiling. Democrats are planning a test vote on a measure that would grant President Barack Obama authority to raise the debt limit probably for a year, unless two-thirds of both chambers of Congress disapprove.
Obama has said he expects Congress to reach an agreement to raise the nation's $16.7 trillion debt limit in time to avoid a default.
The International Monetary Fund (IMF) warned on Tuesday the US government default "could seriously damage" the world economy, cutting the global outlook for this year. The global growth will be 2.9% this year, before rising 3.6% next year.
The Fed is due to hold its Federal Open Market Committee meeting on October 29-30, when analysts had expected the officials to vote for the tapering of the actual $85-billion-a-month asset purchase program. However, given the budget bill stalemate, tapering is unlikely to be approved.
