* Gold lifted by U.S. budget, debt ceiling talks
* Dollar index slides to near 7-month low
* Chinese demand weak ahead of week-long holiday
By Jan Harvey
LONDON, Sept 27 Gold jumped more than 1 percent
on Friday as wrangling over the U.S. budget and jitters over the
outlook for Federal Reserve policy stoked buying interest, with
buying accelerating sharply on a break of a key chart level.
U.S. gold futures jumped to a high of $1,345.20 an ounce, up
1.6 percent, after breaking through the 100-day moving average
at $1,341 an ounce, a level it slid below last Friday when
prices crashed 2.9 percent.
"There were some stops above there, and equity futures are
weaker because people are concerned about the political
situation in the U.S. and the prospect of another fiscal cliff,"
Simon Weeks, head of precious metals at ScotiaMocatta, said.
"That's driving it at the moment."
Spot gold was at $1,337.90 an ounce at 1424 GMT, up
1.1 percent, while U.S. gold futures for December
delivery were up $14.30 an ounce at $1,338.40.
Concern over budget and debt negotiations in Washington sent
the dollar close to a seven-month low and pressured world
equities on Friday.
U.S. House of Representatives Republicans on Thursday
refused to accede to President Barack Obama's demand for
straightforward bills to run the government beyond Sept. 30 and
to lift borrowing authority to avoid a default.
"Support is obviously coming from the U.S., where lawmakers
are once again playing Russian roulette with the budget and debt
limit," Ole Hansen, head of commodity strategy at Saxo Bank,
"At the same time a couple of stronger data points and
recent Fed comments do not completely rule out the potential for
tapering later this year," he added. "But for now the main focus
is on the U.S. Congress."
Federal Reserve official Charles Evans stoked uncertainty
over the central bank's plans to reduce its asset purchases on
Friday, saying tapering could begin this year or be pushed into
2014, based on economic forecasts.
The prospect of an end to ultra-loose monetary policy, which
keeps interest rates low while stoking inflation fears, has
knocked prices 20 percent lower this year.
PHYSICAL DEMAND WEAK
Physical demand in China was weak, traders in Hong Kong
said, with premiums on the Shanghai Gold Exchange to London spot
prices falling to multi-month lows of $7 an ounce this week from
about $30 in April-May.
Some gold shipments to China have been postponed by a few
weeks as an upcoming holiday curbs demand for the metal, they
said. Chinese markets will be closed Oct. 1-7 for the National
Silver was up 0.7 percent at $21.78 an ounce,
The gold/silver ratio, which measures the number of silver
ounces needed to buy an ounce of gold, earlier rose to a
six-week high at 61.4.
Spot platinum was up 0.8 percent at $1,416.24 an
ounce, while spot palladium was up 0.5 percent at $721.84
Platinum took support from a strike over job cuts at Anglo
American Platinum's operations in South Africa Amplats,
the world's top platinum producer, which said last month it
would cut 4,800 jobs.
(Additional reporting by A. Ananthalakshmi in Singapore;
editing by William Hardy and James Jukwey)