Gold Swings in London on Debt Limit Concern as Shutdown Extends
LONDON (Oct 7) Gold swung between gains and losses in London as investors weighed the outlook for a U.S. debt limit extension as the government shutdown continued and slowing physical demand for the metal.
The first partial government shutdown in 17 years began Oct. 1, delaying economic releases including monthly job data that was scheduled Oct. 4. House Speaker John Boehner said the U.S. could end up in default unless President Barack Obama negotiates and Treasury Secretary Jacob J. Lew reiterated that the U.S. will run out of its ability to borrow on Oct. 17.
Gold is set for the first annual drop in 13 years and holdings in gold-backed exchange-traded products are at a three- year low as some investors lost faith in the metal as a store of value and on speculation the Federal Reserve will slow debt purchases. Bullion rose as much as 21 percent from a 34-month low set in June as lower prices boosted demand for jewelry and bars, particularly in Asia.
“Physical demand from across the globe has weakened,” Mumbai, India-based AnandRathi Commodities Ltd. said today in a report. “The longer that the U.S. government is partially shut and the closer to Oct. 17 without any deal being reached, the greater the anxiety will be. Such a scenario should benefit gold and possibly lift prices or, at least, contain the downside.”
Gold Price
Gold for immediate delivery was little changed at $1,310.76 an ounce by 9:14 a.m. in London. Prices fell as much as 0.2 percent, after rising 0.6 percent. Bullion for December delivery rose 0.1 to $1,310.90 an ounce on the Comex in New York. Futures trading volume was 66 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
U.S. lawmakers continued to clash over the emergency budget needed to end the shutdown, a deadlock that investors speculate will seep into talks to raise the country’s $16.7 trillion debt ceiling. The move has placed thousands of federal employees on unpaid leave and closed down some services.
“Investors are sidelined amid uncertainty about the U.S. government shutdown and debt ceiling,” said Mark To, head of research at Wing Fung Financial Group, a Hong Kong-based precious metals trader and refiner. “The jobs report didn’t come out on Friday, taking away an important bit of economic data from those seeking to make a decision on when the Fed will taper its bond-buying program.”
Gold ETP holdings fell 1.1 metric tons to 1,922.4 tons on Oct. 4, the lowest since May 2010, data compiled by Bloomberg show.
Silver for immediate delivery fell 0.2 percent to $21.6968 an ounce in London. Palladium was little changed at $698.80 an ounce. Platinum declined 0.2 percent to $1,385.52 an ounce.
