Gold headed for its loftiest week in around two months on Friday on hopes that the US Federal Reserve may delay a planned tapering of its bullion-friendly stimulus programme to help control damage to the economy from a weeks-long partial government shutdown.
Although spot gold eased marginally by 0.11% to $1,318.90 an ounce by 7.53 ET on Friday and US December gold futures declined 0.35% an ounce at $1318.40, the precious metal still headed for its best week since early August, thanks to a 3% jump on Thursday after the US senate hammered out a temporary solution to the debt crisis. In Delhi, gold prices dropped by R120 to R31,500 per ten grams on Friday tracking subdued sentiments overseas, after gaining R1,070 in the previous two days.
Gold had hit a record $1,920 an ounce during the last debate over the US debt cap in 2011 and Congress had reached an agreement only at the last minute.
Similarly, hours before the Thursday deadline to raise the $16.7-trillion debt ceiling, the US Congress approved a deal to end the 16-day partial government shutdown and pulled it back from the brink of a historic debt default. However, since the deal raises the debt ceiling only up to February 7, 2014, and allows government funding until January 15, analysts say the world’s largest economy may face another government shutdown early next year amid fundamental issues of spending and deficits that divide Republicans and Democrats.
This has raised expectations that the Fed may have to delay the start of the rollback of its $85-billion monthly bond-buying programme to fix the economy first. It means the era of rock-bottom interest rates and easy money may continue for some more time, enhancing the appeal of gold as a safe-haven investment tool and a hedge against inflation. Gold lost around 20% this year after the Fed announced in June its decision to curtail its bullion-friendly bond purchase programme later this year.
Among other precious metals, silver fell by 0.46% to $21.85 an ounce. Spot platinum rose 0.19% to $1,440.30 an ounce on apprehensions about a supply crunch following mine strikes in South Africa, while spot palladium remained flat at $739.98 an ounce.