* Gold steady but near 3-month lows
* U.S. senators hint at possible fiscal deal on Tuesday
* Gold unlikely to rally unless U.S. defaults, downgraded
By A. Ananthalakshmi
SINGAPORE, Oct 15 Gold hovered near three-month
lows on Tuesday as outflows from gold funds continued and as
lawmakers made some progress towards resolving the U.S. budget
Gold, whose safe-haven appeal is usually burnished during
times of geopolitical and economic uncertainty, has failed to
gain despite protracted wrangling over the fiscal deadlock in
the United States.
It has dropped about 4 percent to below $1,300 an ounce
since a partial government shutdown began on Oct. 1.
"Based on historical analysis, we think the weeks following
a (possible) default would be the time for gold to rally," said
Amber MacKinnon, an analyst at Nomura Securities in Sydney.
"Unless we actually see that, gold will be in a holding
pattern. The upside is more likely if we get a (credit)
During the last fiscal debate over raising the U.S. debt
ceiling in 2011 - when a deal was only reached at the last
minute - gold did not react sharply until after Standard &
Poor's downgraded the U.S. credit rating, MacKinnon said. Prices
eventually hit an all-time high of $1,920 in September that
"It appears that gold doesn't rally on a safe-haven basis in
times of political tensions in the U.S. until after the event
has occurred," MacKinnon said.
Spot gold had slipped 0.2 percent to $1,270.70 an
ounce by 0641 GMT, after snapping a four-day losing streak in
the previous session.
SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 1.85 tonnes to
889.13 tonnes on Monday to hit fresh four-year lows - reflecting
diminishing investor confidence.
A month of combat in the U.S. Congress over government
spending showed signs of giving way to a Senate deal to reopen
shuttered federal agencies and prevent an economically damaging
default on federal debt.
Senate Majority Leader Harry Reid, a Democrat, and his
Republican counterpart, Mitch McConnell, ended a day of constant
talks with optimistic proclamations, as details leaked out of
the pact they were negotiating.
Precious metals prices 0641 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1270.70 -2.09 -0.16 -24.12
Spot Silver 21.12 -0.13 -0.61 -30.25
Spot Platinum 1370.74 -6.76 -0.49 -10.70
Spot Palladium 709.97 -2.53 -0.36 2.60
COMEX GOLD DEC3 1270.60 -6.00 -0.47 -24.18 19738
COMEX SILVER DEC3 21.14 -0.22 -1.03 -30.26 6977
COMEX gold and silver contracts show the most active months
(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)