Gold was steady on Tuesday and hovered near a one-week high as the partial U.S. government shutdown entered a second week, moving closer to the deadline for raising the national debt ceiling. Comments from President Barack Obama that he would support a short-term debt limit increase to avert a U.S. default eased some pressure. Silver fell, while platinum and palladium rose.
On the Comex division of the New York Mercantile Exchange, gold futures for December settlement rose by 0.03% to $1 325.50 per troy ounce at 7:53 GMT. Prices held in range between days low at $1 320.90 and a one-week high of $1 328.10. The precious metal rose by 0.7% on Monday and extended its weekly advance to 1.1% after Tuesdays gain.
Gold futures continued to rise as the persisting U.S. budget deadlock threatened to hurt the economys last quarter growth. Senate Democrats are planning a test vote this week to allow President Obama raise the nations debt limit unless two thirds of Congress dissent. Some pressure was relieved on Monday after Obama said he would support a short-term increase of the U.S. borrowing limit to avoid an unprecedented debt default. According to JPMorgan analysts, every week of shutdown reduces the economic expansion in the last three months by an annualized 0.12%.
Most analysts however expected that an agreement would be struck, even if its a last-minute one. Republican House Speaker John Boehner pledged on Sunday not to raise the nation’s borrowing limit without a “serious conversation” about what is driving the debt. Boehner however said he doesn’t intend to let the government default, something which he told his fellow members behind closed doors, even if it involves using Democratic votes.
Alexis Garatti, a macroeconomist at Haitong International Research in Hong Kong, said for CNBC: “There wont be any default on the U.S. debt as I dont think Congress will want to take that risk. We will probably have a last minute agreement. In the very short term, we expect gold prices to increase because of the surge in risk aversion. But we expect an agreement before the 17th, so gold will retreat to levels seen in the beginning of the month.”
Gold drew support by a weaker dollar with the dollar index remaining near October 3′s 8-month low. The December contract rose by 0.11% to 80.10 on Tuesday at 7:55 GMT and held in range between day’s high and low of 80.15 and 79.98. The U.S. currency gauge fell by 0.2% on Monday after losing almost 1.8% in the previous three weeks. Weakening of the greenback makes dollar-priced raw materials cheaper for foreign currency holders and boosts their appeal as an alternative investment.
Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, remained unchanged for a third day at 899.99 tons, data on the web-site showed. This was the lowest level since February 2009.
The metal also drew support by upbeat physical demand from its top two consumers, China and India. Dealers in Hong Kong said they were seeing good buying from China after the countrys Golden Week holiday ended. Meanwhile in India, gold importers began processing orders to re-stock ahead of the peak wedding and festival season.
Elsewhere on the precious metals market, silver for delivery in December fell by 0.06% to $22.373 per ounce at 7:47 GMT. Prices held in range between days high of $22.468, the strongest level since October 20, and low at $22.230 per ounce respectively. Platinum futures for January settlement advanced by 0.41% to $1 407.70 an ounce and ranged between a 10-day high of $1 408.30 an ounce and low of $1 397.05. Palladium for delivery in December rose by 0.80% to $711.00 an ounce and held in range between a one-week high of $711.70 and session low of $702.10 per troy ounce.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
