Gold Rebounds From 8-Week Low as Investors Weigh U.S. Shutdown
LONDON (Oct 2) Gold rebounded after reaching an eight-week low in London as investors weighed a U.S. government shutdown and the outlook for U.S. stimulus.
U.S. lawmakers still need to agree on raising the debt limit to avoid a default after Oct. 17, following the government’s first partial shutdown in 17 years. The shutdown began after House and Senate lawmakers failed to agree on a spending plan for the fiscal year that started yesterday.
Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value. Holdings in gold-backed exchange-traded products slid 27 percent this year on speculation the Federal Reserve will slow debt purchases. While the Fed said last month it will delay reducing stimulus, economists surveyed by Bloomberg Sept. 18-19 expect the first step in cutting bond buying in December.
“Between the U.S. government shutdown and Fed tapering, the risk to markets are nowhere near gone,” Jordan Eliseo, chief economist at the Australian Bullion Company Ltd., said by phone from Sydney. “Some people still look to gold to hedge against economic uncertainty. The bigger issues are the debt ceiling debate and the month-to-month decisions by the Fed.”
Gold for immediate delivery rose 0.3 percent at $1,291.88 an ounce by 9:39 a.m. in London. Prices reached $1,277.15, the lowest since Aug. 7. Bullion for December delivery gained 0.4 percent to $1,291.60 on the Comex in New York. Futures trading volume was 11 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
Debt Limit
Treasury Secretary Jacob J. Lew urged Congress to extend the nation’s borrowing authority “immediately,” in a letter addressed to House Speaker John Boehner dated yesterday. Lew said the U.S. began using the final extraordinary measures to avoid breaching the debt limit, and repeated that they will be exhausted no later than Oct. 17.
Gold dropped 3.1 percent yesterday, the most in more than two weeks, as global equities gained 0.7 percent.
“The market does not think that the U.S. government shutdown will last long,” Sharps Pixley Ltd., a brokerage handling physical bullion in London, wrote today in a report. “A last-minute debt deal could raise the safe-haven bid for gold while economic damages from the U.S. shutdown could delay the Fed’s tapering and support the gold price.”
Silver for immediate delivery fell 0.3 percent to $21.1152 an ounce in London, after reaching $20.6217 yesterday, the lowest since Aug. 12. Palladium slipped 0.9 percent to $713.78 an ounce. Platinum declined 0.2 percent to $1,383.10 an ounce. It fell to $1,373.68 yesterday, the lowest since July 11.
