Gold holds up as U.S. strikes deal to end budget impasse

Reuters
24 karat gold bars are seen at the United States West Point Mint facility in West Point, New York
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24 karat gold bars are seen at the United States West Point Mint facility in West Point, New York June 5, 2013. REUTERS/Shannon Stapleton/Files

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold was little changed on Thursday after U.S. lawmakers passed a temporary spending bill to avert a historical debt default and end a two-week long government shutdown, dimming the metal's safe-haven appeal.

The deal, however, offers only a temporary fix - funding the government until January 15 and increasing the debt ceiling until February 7. Republicans and Democrats are yet to fully resolve their differences over spending, raising the possibility of another government shutdown early next year.

Spot gold was down just 0.05 percent at $1,280.39 an ounce by 0314 GMT.

"Over the next few weeks, markets will tend to be pretty cautious because this is just kicking the can down the road," said Victor Thianpiriya, an analyst at ANZ.

"The sentiment for gold is still quite bearish with outflows from exchange traded funds and the risk sentiment is pretty week. It is hard to see reasons why gold will be higher."

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 3.6 tonnes to 885.53 tonnes on Wednesday - hitting fresh four-year lows.

The fund has seen over 400 tonnes in outflows this year, dampening investor sentiment.

Gold has fallen about 4 percent since the government shutdown began on October 1, dropping below $1,300 an ounce, as the metal failed to receive strong safe-haven bids.

Traders said markets did not price in a default since they always expected the United States to come up with a last-minute agreement.

With the passing of the deal, investors will turn their focus to key economic data - which had not been released due to the shutdown - to determine the impact of the shutdown on the economy and the Federal Reserve's stimulus measures.

Physical demand continued to remain strong with premiums in India and China rising.

Demand for U.S. gold coins surged in October, reversing recent weak sales, boosted by bargain-hunting as prices fell below $1,300 an ounce.

Precious metals prices 0314 GMT

Metal Last Change Pct chg YTD pct chg Volume

Spot Gold 1280.39 -0.60 -0.05 -23.54

Spot Silver 21.27 -0.07 -0.33 -29.76

Spot Platinum 1396.49 8.59 +0.62 -9.02

Spot Palladium 712.72 -1.28 -0.18 2.99

COMEX GOLD DEC3 1280.40 -1.90 -0.15 -23.59 11055

COMEX SILVER DEC3 21.29 -0.08 -0.37 -29.77 5636

Euro/Dollar 1.3546

Dollar/Yen 98.64

COMEX gold and silver contracts show the most active months

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford and Richard Pullin)

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