October 8, 2013 / 10:47 AM / 4 years ago

PRECIOUS-Gold eases on profit taking, U.S. budget impasse in focus

5 Min Read

* U.S. government shutdown looks likely to continue
    * Budget impasse seen prompting Fed to stick with stimulus
    * China's return from holiday supports prices -dealers
    * Coming up: Chicago Fed's Evans at IMF event on Wednesday


    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Oct 8 (Reuters) - Gold prices eased on
Tuesday as investors took profits, but losses were limited as
growing uncertainty about the U.S. budget impasse and a looming
deadline to raise the U.S. debt ceiling bolstered bullion's
safe-haven appeal.
    There were few signs U.S. politicians were willing to
compromise to end the partial government shutdown. Republicans
proposed the creation of a bipartisan panel to work on deficit
reduction and make recommendations on a debt-limit increase, but
the plan was quickly dismissed by Democrats. 
    U.S. Treasuries, also seen as a safe haven, turned lower
after initially rising, while the S&P 500 index fell
sharply for a second day.  
    Reaction in the financial markets to the deadlock in
Washington has been mild, but analysts said bullion should
benefit from the uncertainty of a possible U.S. debt default if
Congress fails to raise the U.S. debt ceiling by Oct. 17.
    "The longer the shutdown goes on, the bigger the problems we
are going to have in the economy," said Ed Moy, chief strategist
of Morgan Gold, which offers retirement accounts that include
precious metals.
    "Fed will likely want to see what the impact of the shutdown
is going to be before it tapers its stimulus," said Moy, a
former head of the U.S. Mint.
    Spot gold fell 0.2 percent to $1,319.10 an ounce by
3:43 p.m. EDT (1943 GMT).
    U.S. Comex gold futures for December delivery settled
down 50 cents at $1,324.60.
    Trading volume was about 30 percent below its 30-day moving
average, preliminary Reuters data showed.
    During the last debate over the U.S. debt ceiling in 2011,
gold hit an all-time high of $1,920 an ounce. Congress reached
an agreement to raise the ceiling only at the last minute.
    Bullion has lost a fifth of its value so far in 2013 after
the Fed announced its intention to stem the flow of easy money.
The metal is set to end its 12-year winning streak. 
    Gold's recent rise on budget uncertainty also triggered
interest in gold mining shares. 
    Some participants are interested in the expiring weekly call
options of the Market Vectors Gold Mining Fund, said
WhatsTrading.com options strategist Frederic Ruffy. 

    PHYSICAL SUPPORT
    The Chinese market reopened after a week-long National Day
holiday, but Hong Kong dealers said they were seeing just small
buying interest.
    China's net gold purchases from Hong Kong fell 5 percent in
August from July, but were still healthy at 110.5 tonnes.
 
    Gold importers in India started processing orders to
re-stock ahead of the peak wedding and festival season and after
the customs department cleared remaining consignments at a major
airport. 
    Among other precious metals, silver eased 0.1 percent
to $22.29 an ounce. Platinum gained 0.6 percent to
$1,399.99 an ounce on fears that mine strikes in South Africa
could hurt supply. Palladium rose 1.3 percent to $710.37
an ounce. 
 3:43 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1324.60  -0.50   0.0  1315.40 1330.80  116,386
 US Silver DEC  22.443  0.057   0.3   22.110  22.525   30,300
 US Plat JAN   1403.70   1.80   0.1  1397.00 1411.30    6,264
 US Pall DEC    714.90   9.55   1.4   702.30  717.00    3,183
                                                               
 Gold          1319.10  -2.19  -0.2  1316.55 1329.60         
 Silver         22.290 -0.020  -0.1   22.140  22.460
 Platinum      1399.99   7.69   0.6  1400.00 1406.24
 Palladium      710.37   9.37   1.3   704.50  714.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        123,803   163,059   189,589     24.03    0.42
 US Silver       32,118    55,448    57,455     34.67    1.39
 US Platinum      6,424    14,987    13,010     21.09    0.00
 US Palladium     3,301     5,689     5,788

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