Gold eases on profit taking, U.S. budget impasse in focus

NEW YORK/LONDON (Oct 8)    Gold prices eased on Tuesday as investors took profits, but losses were limited as growing uncertainty about the U.S. budget impasse and a looming
deadline to raise the U.S. debt ceiling bolstered bullion's safe-haven appeal.
  

There were few signs U.S. politicians were willing to compromise to end the partial government shutdown. Republicans proposed the creation of a bipartisan panel to work on deficit
reduction and make recommendations on a debt-limit increase, but the plan was quickly dismissed by Democrats.
  

U.S. Treasuries, also seen as a safe haven, turned lower after initially rising, while the S&P 500 index fell
sharply for a second day. 
  

Reaction in the financial markets to the deadlock in Washington has been mild, but analysts said bullion should benefit from the uncertainty of a possible U.S. debt default if Congress fails to raise the U.S. debt ceiling by Oct. 17.
  

"The longer the shutdown goes on, the bigger the problems we are going to have in the economy," said Ed Moy, chief strategist of Morgan Gold, which offers retirement accounts that include
precious metals.
  

"Fed will likely want to see what the impact of the shutdown is going to be before it tapers its stimulus," said Moy, a former head of the U.S. Mint.
  

Spot gold fell 0.2 percent to $1,319.10 an ounce by 3:43 p.m. EDT (1943 GMT).  U.S. Comex gold futures for December delivery settled down 50 cents at $1,324.60.
  

Trading volume was about 30 percent below its 30-day moving average, preliminary Reuters data showed.
  

During the last debate over the U.S. debt ceiling in 2011, gold hit an all-time high of $1,920 an ounce. Congress reached an agreement to raise the ceiling only at the last minute.
  

Bullion has lost a fifth of its value so far in 2013 after the Fed announced its intention to stem the flow of easy money. The metal is set to end its 12-year winning streak.
  

Gold's recent rise on budget uncertainty also triggered interest in gold mining shares.
 

Some participants are interested in the expiring weekly call options of the Market Vectors Gold Mining Fund, said WhatsTrading.com options strategist Frederic Ruffy.

PHYSICAL SUPPORT
  

The Chinese market reopened after a week-long National Day holiday, but Hong Kong dealers said they were seeing just small buying interest.  China's net gold purchases from Hong Kong fell 5 percent in
August from July, but were still healthy at 110.5 tonnes.

Gold importers in India started processing orders to re-stock ahead of the peak wedding and festival season and after the customs department cleared remaining consignments at a major airport.
Among other precious metals, silver eased 0.1 percent to $22.29 an ounce. Platinum gained 0.6 percent to $1,399.99 an ounce on fears that mine strikes in South Africa could hurt supply. Palladium rose 1.3 percent to $710.37