PRECIOUS-Gold extends gains on U.S. shutdown, China re-opening

Tue Oct 8, 2013 3:10am EDT

* Gold climbs after 0.8 pct gain in previous session
    * U.S. shutdown in second week, looks set to continue
    * China returns from holiday, provides some support for
prices

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Oct 8 (Reuters) - Gold extended gains to a second
session on Tuesday as the U.S. government shutdown dragged on
and a deadline to raise the national debt ceiling loomed,
bolstering the metal's safe-haven appeal.
    Prices also found support from China, which reopened after a
week-long National Day holiday. China is the world's
second-biggest gold consumer after India.
    The budget impasse that has shut down parts of the U.S.
government for a week looked set to continue as Congress
remained deadlocked over funding President Barack Obama's
healthcare plan. 
    The United States faces an Oct. 17 deadline to raise its
$16.7 trillion debt limit, with investors fearing the budget
disagreement would affect talks to lift the debt ceiling and
push it towards an unprecedented default.
    "There won't be any default on the U.S. debt as I don't
think Congress will want to take that risk," said Alexis
Garatti, an economist at Haitong International Research in Hong
Kong. "We will probably have a last minute agreement."
    "In the very short term, we expect gold prices to increase
because of the surge in risk aversion. But we expect an
agreement before the 17th, so gold will retreat to levels seen
in the beginning of the month."
    Garatti also said the uncertainty around the debt ceiling
will prompt the Federal Reserve to postpone any tapering of the
stimulus measures to December or early 2014, providing some
medium-term support for gold.
    Spot gold rose 0.3 percent to $1,325.19 an ounce by
0631 GMT. Platinum climbed for a third straight session
on fears mine strikes in South Africa could hurt supply.
 
    Gold has lost a fifth of its value this year on fears the
Fed will stem the flow of easy money that has increased the
metal's appeal as a hedge against inflation.

    PHYSICAL SUPPORT
    Dealers in Hong Kong said they were seeing good buying
interest from China. However, the demand was not strong enough
to boost gold prices sharply. 
    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. 
    Gold imports had virtually come to a stop in India for about
two months after a new rule that required a fifth of all imports
to be re-exported. Banks are just beginning to place orders
after uncertainty over the rules were cleared up. 
    
  Precious metals prices 0631 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1325.19    3.90   +0.30    -20.86
  Spot Silver        22.34    0.03   +0.13    -26.22
  Spot Platinum    1400.99    8.69   +0.62     -8.73
  Spot Palladium    703.97    2.97   +0.42      1.73
  COMEX GOLD DEC3  1325.70    0.60   +0.05    -20.89        19577
  COMEX SILVER DEC3  22.39    0.00   +0.02    -26.12         7092
  Euro/Dollar       1.3567
  Dollar/Yen         97.14
 
  COMEX gold and silver contracts show the most active months
 
 
 (Editing by Michael Perry and Muralikumar Anantharaman)