Gold recovers from 2-month low as shutdown continues, QE outlook

Gold rebounded from a recently hit two-month low as market players weighed a continuing partial government shutdown and the outlook for delayed Fed stimulus tapering in case the budget stalemate is protracted and hurts significantly the economic growth. Silver and palladium fell, while platinum advanced.

On the Comex division of the New York Mercantile Exchange, gold futures for December settlement rose by 0.48% to $1 292.30 per troy ounce at 8:08 GMT. Prices bottomed at $1 278.20 an ounce, the lowest since August 7, while days high stood at $1 293.20 per ounce. The precious metal tumbled 3% on Tuesday, extending its weekly decline to over 3.3%.

Hundreds of thousands of state employees were put on an unpaid leave after the U.S. budget talks stalemate remained unresolved. U.S. lawmakers were still in a deadlock after they failed to pass a budget for the 2014 fiscal year before the October 1 deadline. The White House said on its website that the shutdown could cost the U.S. economy $10 billion per week. It could also cut the U.S. fourth-quarter economic growth by as much as 1.4% due to lost output from furloughed workers.

An Obama administration official announced that the Labor Department will defer releasing its monthly employment statistics, if the federal government shutdown persists. Postponement of other economic data might also occur.

Meanwhile, both parties still disagree over raising the nation’s debt limit, which would render the U.S. Treasury Department unable to borrow around October 17. According to the Congressional Budget Office, the U.S. won’t have enough money to pay all of its bills at some point between October 22 and October 31. Moody’s Investors Service warned that a failure to raise the debt ceiling would have a much worse impact on the financial markets than a government shutdown.

The dollar index, which measures the greenbacks strength against a basket of six major peers, was down 0.07% on the day at 80.21 by 8:10 GMT. The December contract held in range between days high and low of 80.38 and 80.20. The U.S. currency gauge fell to an eight-month low on Tuesday but rebounded and settled the day 0.1% lower, extending its weekly decline to 0.2%.

Meanwhile, concerns over the shutdowns negative impact on growth boosted speculations that the Federal Reserve might delay further tapering its monetary easing program, depending on the protraction of the budget impasse.

Jordan Eliseo, chief economist at the Australian Bullion Company Ltd., said for Bloomberg: “Between the U.S. government shutdown and Fed tapering, the risk to markets are nowhere near gone. Some people still look to gold to hedge against economic uncertainty. The bigger issues are the debt ceiling debate and the month-to-month decisions by the Fed.”

Elsewhere on the precious metals market, silver futures for December settlement traded at $21.142 per troy ounce at 8:11 GMT, down 0.16% on the day. Prices held in range between days high of $21.225 and low at $20.990, near yesterdays seven-week low. Platinum for delivery in January rose by 0.09% to $1 386.55 an ounce and shifted in days range between $1 389.60 and $1 378.90, near Tuesdays lowest level since July 10. Palladium futures for December settlement fell by 0.61% to $714.50 per ounce and held in range between session high of $720.20 and a two-week low of $720.20