COMMODITIES-U.S. debt worries boost gold, pressure oil

NEW YORK Mon Oct 7, 2013 5:11pm EDT

NEW YORK Oct 7 (Reuters) - Commodity markets finished Monday with mixed results as worries brought on by political wrangling over the U.S. debt drove investors to gold as a safe haven, but kept pressure on oil prices for fear of the potential impact on economic growth.

Gold's safe-haven appeal sent it nearly 1 percent higher, as the U.S. government shutdown entered its second week with no sign politicians were willing to resolve a budget impasse and raise the debt ceiling.

The White House reiterated that President Barack Obama would not negotiate with Republicans over the threat of a debt default, as stock prices fell but other safe-haven assets, such as U.S. Treasuries and the Swiss franc, were also higher.

"There is flight-to-safety buying all the way across from bonds to currencies to metals," said Bill O'Neill, partner of commodities investment firm LOGIC Advisors.

Spot gold was up 0.88 percent at $1,322.08 an ounce by 4:00 p.m. EDT (2000 GMT), having earlier reached its highest since Oct. 1 at $1,327.94. U.S. gold futures for December settled up $15.20 an ounce at $1,325.10.

Economists are increasingly concerned that the budget showdown could prevent legislation to raise the country's borrowing limit by an Oct. 17 deadline, increasing the possibility of a sovereign debt default.

The U.S. budget deadlock in Congress pushed the dollar near an eight-month low against a basket of currencies, adding to gold's appeal and helping to underpin oil's losses.

While worries about the debt ceiling put early pressure on crude oil futures on both sides of the Atlantic fell, both sides also pared those losses following a report that a key pipeline delivering crude oil from Cushing, Oklahoma, had resumed shipping after an earlier outage.

U.S. crude oil slipped 81 cents to settle at $103.03 a barrel, after trading close to $2 a barrel lower earlier. Brent crude futures reversed early losses to finish up 22 cents at $109.68 a barrel, after trading as low as $107.89.

The bellwether Thomson Reuters-Jefferies CRB index rose 0.31 percent after all 19 of the commodity markets included in the index had closed, with oil's late loss trimming helping to lift the index.

In Chicago grain markets, U.S. wheat futures rose as expected production declines in Russia and Ukraine put a premium on high-protein supplies. Corn futures firmed on strength in wheat, while soybeans were close to unchanged.

Copper prices stagnated on low volumes as investors paused to monitor developments at the London Metal Exchange industry event, referred to as LME Week, and top consumer China was absent for the last day of its week-long break. Benchmark copper edged down 0.2 percent to $7,245 a tonne at the close of trading.

Elsewhere, ICE cocoa climbed above a one-year high and London cocoa rallied to its highest in about two years as the International Cocoa Organization forecast a deficit in the next four years. Recent rains also stoked worry of supply concerns in West Africa, the world's top growing region.