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HindustanTimes Sat,02 Aug 2014

Gold ticks up as US government shutdown begins

Reuters  Singapore, October 01, 2013
First Published: 12:07 IST(1/10/2013) | Last Updated: 12:17 IST(1/10/2013)

Gold edged higher on Tuesday as the US government shut down some of its operations after Congress failed to agree on a spending bill, but gains were limited as investors believe the stand-off will likely soon be resolved.

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After missing a midnight deadline (0400 GMT), US federal agencies were directed to cut back services because of partisan deadlock in Congress over Republican efforts to halt President Barack Obama's healthcare reforms by using a temporary spending bill.

The impasse also raised concerns over whether Congress can meet a more important deadline in mid-October to raise the debt-ceiling limit.

Gold gained early on Monday on safe-haven bids surrounding the shutdown, but pulled back as buying slowed despite a weaker dollar.

Spot gold was up 0.13% at $1,328.70 an ounce by 0606 GMT on Tuesday.

"Should the political wrangling continue over the debt-ceiling negotiations mid-month, this could provide the impetus for gold to break out of its $1,300 to 1,350 range," said Victor Thianpiriya, an analyst at ANZ in Singapore.

"The market is not putting on a big net position which makes me think that when we get a breakout, it is likely to be sizeable."

A Sydney-based trader said gold was not seeing much safe-haven buying as the issue was likely to be resolved soon and there was not much upside to gold beyond that.

The last time the US government shut down in 1995/96, gold - which was then trading at less than $400 an ounce -- gained about 3%.

However, failure to raise the $16.7 trillion debt ceiling by mid-October would have a much bigger impact as it would force the United States to default on some payments - an event that could cripple its economy and send shockwaves round the globe.

When the debt ceiling issue came up in 2011, an agreement was reached only in the last minute and gold hit an all-time high of $1,920 an ounce, in part because of the uncertainties surrounding a deal.

SLOW PHYSICAL DEMAND

The Perth Mint's sales of gold coins and bars in September more than doubled from the previous month but they were still 17% lower than the same period last year.

Demand for US gold coins fell 81% in September on an annual basis, as political turmoil in Syria failed to rekindle retail buying that has slowed after months of exceptional bargain hunting, data on the US Mint website showed on Monday.

Markets in China, the world's second biggest gold consumer after India, were closed for the National Day holiday.

 Precious metals prices 0606 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1328.70    1.76   +0.13    -20.65
  Spot Silver        21.72    0.08   +0.37    -28.27
  Spot Platinum    1399.99    1.19   +0.09     -8.80
  Spot Palladium    720.47   -1.03   -0.14      4.11
  COMEX GOLD DEC3  1329.30    2.30   +0.17    -20.68        10598
  COMEX SILVER DEC3  21.75    0.04   +0.17    -28.25         2138
  Euro/Dollar       1.3542
  Dollar/Yen         98.13
 
  COMEX gold and silver contracts show the most active months


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