October 7, 2013 / 3:47 AM / in 4 years

PRECIOUS-Gold edges up as U.S. shutdown drags on, debt limit looms

4 Min Read

* Gold gains as dollar index near 8-month low 
    * Gold, silver awaiting direction from debt ceiling talks
    * Physical demand eyed as China returns on Tuesday from
holiday

 (Adds analyst comment, updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Oct 7 (Reuters) - Gold nudged up in Asian trading
on Monday as the near-week long U.S. government shutdown raised
fears Congress may struggle to raise the debt ceiling in time,
burnishing bullion's safe-haven appeal.
    Failure to raise the U.S. borrowing limit by Oct. 17 will
push the world's biggest economy into an unprecedented debt
default. Congress is already divided on a spending bill,
resulting in a partial government shutdown that is hurting the
economy and delaying key data releases. 
    During the last debate over the U.S. debt ceiling in 2011,
gold hit an all-time high of $1,920 an ounce. An agreement was
reached by Congress only at the last minute.
    "These are critical events that can move the markets
greatly," said Brian Lan, managing director of GoldSilver
Central Pte Ltd in Singapore. "If we don't see any progress till
the 17th, I think we will see gold spike to $1,400."
    "Economic data or any news on the debt ceiling will
determine the direction that gold and silver will take. Until
then, it will be range bound," Lan said.
    The U.S. imbroglio pushed the dollar lower on Monday,
keeping the greenback stuck close to 8-month lows against a
basket of major currencies. A weaker dollar makes it easier for
holders of other currencies to buy gold and other
dollar-denominated commodities.
    Spot gold rose 0.3 percent to $1,314.60 an ounce by
0627 GMT, also lifting silver and palladium.
Platinum added to gains on Monday after a 1.3 percent
increase on Friday, as mine strikes and curbs threatened to hurt
supply. 
    Gold has recently lost some of its safe-haven appeal after
geopolitical tensions in Syria eased. Though the U.S. shutdown
did not spark a lot of safe-haven bids, the prospect of a debt
default did, traders said.  
    "Sentiment remains hesitant towards gold, which has been
reflected in the market positioning," Barclays analysts said in
a note.
    "While the temporary U.S. government shutdown has not proved
to be a positive driver for prices, the risk of a debt ceiling
breach holds scope to spark interest given gold's response in
2011."    
    
    INVESTORS AWAIT PHYSICAL DEMAND
    The Commodity Futures Trading Commission's weekly Commitment
of Traders data, which details positions in U.S. futures and
options markets and is a keenly watched measure to judge
investor sentiment, was not released on Friday due to the
partial government shutdown.
    With no key U.S. data coming in, traders are now eyeing any
pick up in physical demand, especially from China which has been
closed for a week for the National Day holiday.
    Some dealers said they expected Chinese demand to be good at
the current price levels, and a lot stronger if prices fell
below $1,300.
    In top buyer India, importers were ready to process orders
from Monday after the customs department cleared more than a
tonne of gold stuck at airports. 
    
  Precious metals prices 0627 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1314.60    3.99   +0.30    -21.49
  Spot Silver        21.81    0.16   +0.74    -27.97
  Spot Platinum    1387.99    7.39   +0.54     -9.58
  Spot Palladium    699.73    2.73   +0.39      1.12
  COMEX GOLD DEC3  1314.90    5.00   +0.38    -21.54         7048
  COMEX SILVER DEC3  21.85    0.09   +0.43    -27.92         1887
  Euro/Dollar       1.3571
  Dollar/Yen         97.08
 
  COMEX gold and silver contracts show the most active months
 
 (Editing by Ed Davies and Muralikumar Anantharaman)

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