Gold treads water

Gold bars and granules. File photo: Reuters

Gold bars and granules. File photo: Reuters

Published Oct 4, 2013

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London - Gold held steady for a second day on Friday as traders awaited news on a budget deadlock that has triggered a partial shutdown of the US government, while attention turned to imminent talks to lift the US debt ceiling.

Congress must increase the country's borrowing limit on October 17 or risk default, a situation many fear would be far worse than the shutdown.

The dollar trod water near an eight-month low, while European shares dipped and oil prices crept higher.

“There doesn't seem to be a lot of fear yet priced into financial markets (from the shutdown), and until there is, I don't think gold will do much,” Deutsche Bank's global head of commodity research Michael Lewis said.

Of more interest are developments surrounding the debt ceiling, which would have a much greater impact on risk perceptions, he said.

“If those started to deteriorate, that would affect growth expectations in the US, and that would then have an impact on the dollar and expectations for the tapering of the quantitative easing programme, and probably also the equity markets. That would probably be quite constructive for gold.”

Spot gold was down 0.1 percent at $1,315.46 an ounce by 11:26 SA time, while US gold futures for December delivery were down $1.90 an ounce at $1,315.70.

The metal is on track for its biggest one-week drop in three weeks, with its 1.5 percent loss for the week so far largely due to a single massive Comex sell order on Tuesday that sent the price below $1,300 an ounce.

Prices quickly recovered from that level as the budget impasse in Washington dragged on.

 

CHINA CLOSED, ETF POSTS OUTFLOWS

With Chinese markets closed for the National Day holiday and the release of key US nonfarm payrolls data for September suspended due to the shutdown, gold is expected to trade in a narrow range on Friday.

The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, reported a second daily outflow on Thursday, of 1.8 tonnes, suggesting investors' appetite for gold is still soft.

That brings the fund's total outflow for the week to 6 tonnes, its largest in three weeks.

Platinum outperformed, rising 0.9 percent to $1,374.24 an ounce due to a strike at Anglo American Platinum's South African operations. The miner said it was losing an average of 3,100 ounces of production a day.

Spot palladium rose 0.4 percent to $699.47 an ounce, while spot silver added 0.2 percent at $21.62 an ounce.

Technical analysts at Barclays Capital said, however, they saw further underperformance in silver and expected the gold:silver ratio - which reflects the number of silver ounces needed to buy an ounce of gold - to rebound after it retreated from late September's six-week high of 61.5 to 60.8 currently.

“The recent pullback in the ratio provides a buying opportunity,” it said.

Russia's Norilsk Nickel, the world's biggest palladium producer, said in a presentation of its new strategy on Friday that its palladium production may increase by up to 2 percent by 2016. - Reuters

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