* Dollar index climbs off lows as Yellen tipped for Fed role
* Fed decision not to taper in Sept was close call -minutes
* Lack of safe-haven bids reflect fading investor interest
* Coming up: Reuters/U.Michigan consumer sentiment Friday
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 9 Gold fell nearly 1
percent on Wednesday, as the dollar rose while investors
digested news that Federal Reserve Vice Chair Janet Yellen will
be nominated as the next chief of the U.S. central bank.
Bullion stayed lower after news the Fed's shock decision
last month not to reduce its support for the U.S. economy was a
"relatively close call" for policymakers, according to minutes
of the meeting that also suggested there was still broad support
to trim bond-buying this year.
Trading volume, which has been light this week, heated up
briefly for about 10 minutes in U.S. morning trade. Prices
remained rangebound, with buyers on the sidelines due to a lack
of U.S. data and anxiety over how the stand-off in Washington
will play out, as a U.S. government shutdown continues.
Analysts said it looked like investors were losing
confidence in gold as a safe haven, noting that the precious
metal did not rise as much as some had thought it would as the
Oct. 17 deadline neared for a potential U.S. debt default.
"This lack of response to the U.S. shutdown may mask an
underlying negative investor sentiment," said James Steel, chief
precious metals analyst at HSBC.
"At the very least gold's safe-haven bid is lacking. Some of
the explanation for this may be that currency markets have not
moved sharply," Steel said.
Spot gold was down 0.9 percent at $1,306.69 an ounce
by 2:54 p.m. EDT (1854 GMT).
U.S. gold futures for December delivery settled down
$17.40 an ounce to $1,307.20, with trading volume about 5
percent below its 30-day average, preliminary Reuters data
Gold futures prices dropped suddenly between 10:10 and 10:20
a.m. EDT to an intraday low of $1,294 an ounce, with volume of
some 15,000 lots changing hands in 10 minutes, about a fifth of
the market's trading activity at the time.
Options dealers reversed their earlier trades by selling put
options and buying calls, a move seen as bullish for gold
prices, said Comex gold options floor trader Jonathan Jossen.
The dollar rose from an eight-month low against major
currencies as news that Yellen will be nominated as the next Fed
Yellen is expected to continue the Fed's asset-buying
program, which has pressured the dollar. Still, the news brought
some relief to investors who have been on edge because of the
budget deadlock in Washington.
BUDGET CRISIS EYED, ETF HOLDINGS DOWN
Republicans and Democrats in Congress saw signs of hope for
a break in their fiscal impasse, as members of both parties
floated the possibility of a short-term increase in the debt
limit to allow time for broader negotiations.
Congress faces a deadline to increase the $16.7 trillion
borrowing limit to avert the risk of a default on U.S. debt.
As a gauge of investor interest, the world's largest
gold-backed exchange-traded fund, the SPDR Gold Trust,
reported its holdings fell 1.8 tonnes on Tuesday. The fund has
seen outflows of nearly 8 tonnes since the U.S. government
shutdown on Oct. 1.
Among other precious metals, silver dropped 1.6
percent to $21.90 an ounce, tracking losses in gold. Platinum
was down 1.2 percent at $1,379.10 an ounce, while
palladium fell 1.6 percent to $700.72 an ounce.
2:54 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold DEC 1307.20 -17.40 -1.3 1294.60 1323.30 145,952
US Silver DEC 21.891 -0.552 -2.5 21.750 22.410 37,134
US Plat JAN 1383.00 -20.70 -1.5 1377.70 1405.80 6,900
US Pall DEC 704.10 -10.80 -1.5 700.20 713.80 3,803
Gold 1306.69 -11.61 -0.9 1295.15 1321.34
Silver 21.900 -0.350 -1.6 21.780 22.380
Platinum 1379.10 -16.50 -1.2 1380.60 1401.50
Palladium 700.72 -11.28 -1.6 703.50 711.50
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 151,666 162,752 189,410 24.37 0.35
US Silver 39,392 53,859 57,241 34.79 0.12
US Platinum 7,481 15,035 13,019 20.78 0.00
US Palladium 3,880 5,319 5,787