PRECIOUS-Gold firms a touch, eyes on U.S. debt talks

Thu Jul 28, 2011 9:45am EDT

 (Updates prices, adds comment)	
 * Rising dollar curbs interest in gold
 * Fresh news awaited on U.S. debt talks
 * Thousands of South African gold miners strike
 By Jan Harvey	
 LONDON, July 28 (Reuters) - Gold firmed a touch on Thursday,
lifted by concerns over a potential U.S. debt default as
lawmakers in Washington argued over deficit-cutting measures,
and lingering fears that the euro zone debt crisis could spread.	
 Prices briefly rose above $1,620 an ounce, but quickly
steadied after a U.S. government report showing jobless claims
fell more than expected last week, which took some of the heat
out of risk aversion.   	
 Spot gold was up 0.1 percent at $1,614.90 an ounce at
1312 GMT. It hit a record $1,628 an ounce on Wednesday, its
second session at all-time highs this week, before correcting
sharply later in the day.	
 A bill to cut the U.S. deficit faces a nail-bitingly close
vote in Congress on Thursday as the top Republican lawmaker, 
House of Representatives Speaker John Boehner, sought to quell
an internal revolt and push his plan forward. 	
 An agreement to cut the deficit is needed before lawmakers
will agree to raise the U.S. debt ceiling. If it does not do so,
the world's largest economy will run out of money to pay its
bills in less than a week.	
 "The closer we get to the possibility that no agreement will
be reached, that will drive the gold price higher," said VM
Group analyst Carl Firman. "If this continues over the weekend,
Monday could see very hefty gains." 	
 "I believe they will reach an agreement, and then some
profits will be shaved off the gold and the silver markets," he
added. "However, I don't think that will be the end of the gold
rally. These will be the temporary measures, they will just push
the problem further forward. Gold has a long way to go."	
 The dollar recovered early losses to rise 0.4 percent
against a basket of six major currencies , while U.S.
long-dated Treasuries hit session highs.  	
 The euro fell, Italian government bond yields rose and Bund
futures hit a session high as edgy markets turned to safe-haven
assets after an Italian debt auction and as little progress
emerged from Washington. 	
 U.S. gold futures GCv1 for August delivery were up 40
cents an ounce at $1,615.60.	
 "As we draw closer to the Treasury's Aug. 2 deadline for
raising the debt ceiling, there's a rising likelihood of a
rushed, short-term fix that essentially kicks the problem
further into the future," said UBS in a note.	
 "This is likely to prompt the market to price in a higher
risk of a credit ratings downgrade. The spread between 10-year
German bunds and U.S. 10-year (Treasuries) widened the most in
over five months yesterday."	
 	
 	
 SOUTH AFRICAN GOLD MINERS STRIKE	
 On the supply side of the market, tens of thousands of South
African gold miners will stop work on Thursday, adding to a wave
of strikes and potentially costing the gold mining sector $25
million a day in lost output. 	
 The impact of supply outages -- particularly short-term ones
-- on gold is usually fairly soft, given the availability of
above-ground stocks of the metal relative to other commodities.
However, the strike could give more of a lift to platinum prices
if it spreads to that sector.	
 Markets will be closely watching the outcome of talks
between the unions and Anglo American Platinum , the
world's number one producer of the precious metal.	
 "Even the threat of a strike sends a signal to investors
that it is more dangerous to be short platinum, and that will in
itself be supportive of prices," said Mitsui Precious Metals
analyst David Jollie. 	
 Around four in every five ounces of platinum is sourced in
South Africa, so supply disruptions in the republic have a
significant effect on metals prices. South African supply
outages were a major factor driving platinum to a record $2,290
an ounce in early 2008.	
 Spot platinum was up 0.2 percent at $1,788.74, while
spot palladium was up 0.5 percent at $826.97. Silver
 was down 0.2 at $40.09 an ounce.	
	
 (Editing by Keiron Henderson)	
 
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