* Platinum climbs 1.5 pct as strike, water curbs hit miners
* US shutdown drags on as debt-ceiling deadline looms
(Updates prices, adds comment)
By Josephine Mason and Jan Harvey
NEW YORK/LONDON, Oct 4 Gold fell on Friday as
the U.S. dollar recovered from two-month lows and investors
braced for the political stalemate in Washington to drag on for
another week, while platinum rose as water restrictions
threatened to roil South African mines.
U.S. House of Representatives Speaker John Boehner said on
Friday the House would not vote on a spending bill without
conditions to end the government shutdown, and demanded spending
cuts in exchange for raising the government's debt ceiling.
The comments suggested the government shutdown would
continue for a second week, or until politicians reach a deal on
the U.S. debt issue.
"There doesn't seem to be a lot of fear yet priced into
financial markets (from the shutdown), and until there is, I
don't think gold will do much," Deutsche Bank's global head of
commodity research Michael Lewis said.
Spot gold was at $1,310.53 an ounce, down 0.5 percent
at 2:25 p.m. EDT (1825 GMT), while U.S. gold futures for
December delivery settled at $1,309.9, down $7.7 an ounce, or
0.6 percent. The market notched a loss of over 2 percent on the
Moves in most financial markets were muted as the U.S.
government shutdown dragged on. U.S. equities edged
higher while the dollar recovered from an eight-month low.
Continuing for a fourth day, the partial U.S. government
shutdown delayed the release on Friday of nonfarm payrolls data
for September, although the postponement had little noticeable
impact on prices.
Developments surrounding the raising of the U.S. debt
ceiling would have a much greater impact on perceptions of risk,
Deutsche's Lewis said. Congress must increase the country's
borrowing limit by Oct. 17 or risk default.
A default could hurt U.S. growth expectations and the U.S.
dollar, potentially delaying any move by the Federal Reserve to
scale back its massive stimulus program which has bolstered gold
prices, traders said.
"It'd be difficult to be short gold in this environment. You
may be afraid because of all this looming to push the sell
button. You might just wait and see," a New York dealer said.
Asian demand for physical gold picked up this week,
especially in Japan and Thailand, when prices fell below $1,300
an ounce, but interest waned when the market moved off the lows.
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Shares, reported a second daily outflow
on Thursday of 1.8 tonnes, suggesting investors' appetite for
gold remains soft.
SOUTH AFRICAN WATER
Spot platinum was up 1.6 percent at $1,391.5 an ounce
and was on track for its biggest one-day rise in 2-1/2 weeks.
South Africa's Department of Water Affairs said on Friday
that platinum operations around the mining city of Rustenburg
will face curbs on the amount of water they can use to mitigate
problems caused by a drought.
That came after number one platinum producer Anglo American
Platinum said a strike at its South African operations
was cutting output by an average 3,100 ounces a day.
"With half the industry out on strike, plus the news we're
hearing about water restrictions, platinum has had something of
a step up," Mitsubishi analyst Jonathan Butler said.
South Africa is the source of three out of four ounces of
the world's platinum. Threats to output there from strikes and
other outages has helped the autocatalyst metal outperform gold
this year, despite weakness in demand from European carmakers.
Spot palladium eased 0.08 percent to $702.02 an
ounce, while spot silver fell 0.23 percent to $21.73 an
Russia's Norilsk Nickel, the world's biggest
palladium producer, said on Friday its palladium production may
increase by up to 2 percent by 2016.
(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by David Cowell and Bernadette Baum)