* Washington may be nearing deal to resolve debt crisis
* Premiums in India, China rise, demand picks ups
(Updates prices, adds comment, NEW YORK dateline and byline)
By Josephine Mason and Clara Denina
NEW YORK/LONDON, Oct 16 Gold was flat to
slightly lower on Wednesday as U.S. lawmakers closed in on a
deal to avert a U.S. default on its debt and re-open government,
further erasing bullion's appeal as a safe-haven asset.
Losses were limited as physical buying in Asia and the
United States emerged after prices sank to three-month lows on
That has created a "short-term floor" for bullion even as
the debt crisis appears almost over, said Paul Sacks, principal
gold trader at Aurum Options Strategies in New York.
Prices held up even after U.S. Senate leaders announced a
deal to end the political crisis that partially shut down the
federal government and brought the world's biggest economy close
to a debt default.
Most selling had been done as investors expected a deal to
come through before the Oct. 17 deadline, when the U.S.
Treasury's borrowing authority runs out, dealers said.
"People have already pre-positioned themselves over the last
couple of days before the budget deal finally goes down," said
Scott Lookabaugh, senior broker at Great Pacific Wealth
Even so, investors piled into U.S. equities, which rallied
close to all-time highs, and the dollar on news of a deal, which
must still be approved by vote in the Senate and the House of
Spot gold was down 60 cents, or 0.05 percent at
$1,279.64 an ounce at 3:58 p.m. EDT (1958 GMT) after recovering
from an intraday low of $1,268 earlier in the session.
Analysts see technical support around July lows, between
$1,235 and $1,240.
U.S. gold futures for December settled at $1,282.3
an ounce, up $9.1 or 0.7 percent, lifted by physical demand.
Gold has fallen about 4 percent since the government
shutdown began on Oct. 1, disappointing investors who had hoped
that uncertainty over the U.S. economic situation could spur
Instead, prices have been hurt by large sell orders,
amplified by technical selling, over the period.
The last time that high tension emerged over talks to lift
the U.S. debt ceiling in 2011, gold hit record highs. This year,
sentiment towards bullion is much less positive.
While ending the stalemate in Washington has hurt investors'
appetite for safe-haven gold, any deal struck this week would
only "kick the can down the road", potentially leading to fresh
problems next year, said Sacks.
"People are waiting to see what will win out," he said.
The metal has lost nearly a quarter of its value this year
on expectations the Federal Reserve will soon end its stimulus
programme, which has kept interest rates low and stoked
Some dealers were relieved to see a flurry of physical
demand overnight after prices had plunged to $1,251.66, their
lowest since July 10, as lawmakers neared an agreement.
A tentative return of retail investors quelled concerns that
physical demand for coins and jewelery had evaporated after a
burst of buying earlier in the year.
Premiums - the best way to measure demand - rose in Asia,
while demand for U.S. coins has surged so far this month.
Gold premiums in India, the world's biggest buyer of the
precious metal, hit a record $100 an ounce due to a shortage of
supplies to meet festival demand.
In China, premiums in the Shanghai Gold Exchange climbed to
more than $20 an ounce from about $7 two weeks earlier.
In other precious metals, silver was flat at $21.35
Platinum group metals were buoyed by hopes that a deal would
prevent damage to industrial demand for materials used in the
Spot platinum rose 1.1 percent to $1,393 an ounce,
and spot palladium gained 1.35 percent to $715 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore;
editing by Jane Baird, James Jukwey and Andrew Hay)