October 15, 2013 / 3:47 AM / in 4 years

PRECIOUS-Gold in tight range amid U.S. budget talks, fund outflows

* Gold steady but near 3-month lows
    * U.S. senators hint at possible fiscal deal on Tuesday
    * Gold unlikely to rally unless U.S. defaults, downgraded

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Oct 15 (Reuters) - Gold hovered near three-month
lows on Tuesday as outflows from gold funds continued and as
lawmakers made some progress towards resolving the U.S. budget
    Gold, whose safe-haven appeal is usually burnished during
times of geopolitical and economic uncertainty, has failed to
gain despite protracted wrangling over the fiscal deadlock in
the United States. 
    It has dropped about 4 percent to below $1,300 an ounce
since a partial government shutdown began on Oct. 1.
    "Based on historical analysis, we think the weeks following
a (possible) default would be the time for gold to rally," said
Amber MacKinnon, an analyst at Nomura Securities in Sydney.
    "Unless we actually see that, gold will be in a holding
pattern. The upside is more likely if we get a (credit)
    During the last fiscal debate over raising the U.S. debt
ceiling in 2011 - when a deal was only reached at the last
minute - gold did not react sharply until after Standard &
Poor's downgraded the U.S. credit rating, MacKinnon said. Prices
eventually hit an all-time high of $1,920 in September that
    "It appears that gold doesn't rally on a safe-haven basis in
times of political tensions in the U.S. until after the event
has occurred," MacKinnon said.
    Spot gold had slipped 0.2 percent to $1,270.70 an
ounce by 0641 GMT, after snapping a four-day losing streak in
the previous session. 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 1.85 tonnes to
889.13 tonnes on Monday to hit fresh four-year lows - reflecting
diminishing investor confidence. 
    A month of combat in the U.S. Congress over government
spending showed signs of giving way to a Senate deal to reopen
shuttered federal agencies and prevent an economically damaging
default on federal debt. 
    Senate Majority Leader Harry Reid, a Democrat, and his
Republican counterpart, Mitch McConnell, ended a day of constant
talks with optimistic proclamations, as details leaked out of
the pact they were negotiating.
  Precious metals prices 0641 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1270.70   -2.09   -0.16    -24.12
  Spot Silver        21.12   -0.13   -0.61    -30.25
  Spot Platinum    1370.74   -6.76   -0.49    -10.70
  Spot Palladium    709.97   -2.53   -0.36      2.60
  COMEX GOLD DEC3  1270.60   -6.00   -0.47    -24.18        19738
  COMEX SILVER DEC3  21.14   -0.22   -1.03    -30.26         6977
  Euro/Dollar       1.3568
  Dollar/Yen         98.40
  COMEX gold and silver contracts show the most active months
 (Reporting by A. Ananthalakshmi; Editing by Joseph Radford)

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