Gold steady above $1,330/oz as US debt impasse intensifies

Sep 26 2013, 16:19 IST
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SummaryThe US Congress is struggling to pass a spending bill to keep the government funded beyond October 1.

Gold was little changed on Thursday, holding steady above $1,330 an ounce as worries of a possible US. federal debt default and the chances of a government shutdown next week could boost the metal's safe-haven demand.

The US Congress is struggling to pass a spending bill to keep the government funded beyond October 1.

Treasury Secretary Jack Lew pleaded for quick action as he projected an Oct. 17 date when borrowing capacity would be nearly exhausted and only $30 billion would be left in his agency's checking account.

Gold - seen as a safe haven and alternative investment - rose to a record $1,920 an ounce in September 2011, partly on fears over the first US. debt ceiling crisis which was resolved at the last minute.

"I don't think there is going to be a situation quite like in 2011, but sentiment is helping fuel some safe-haven buying and investors don't want to be too short gold at this time," Mitsubishi analyst Jonathan Butler said.

"But we are not seeing any major breakout from this levels and gold could well move sideways in the coming days until we have some more certainty on where we are headed with the US. budget negotiations."

Spot gold stood unchanged at $1,332.81 an ounce by 0946 GMT, after gaining nearly one percent in the previous session. US. gold lost $2.90 an ounce to $1,333.40.

Bullion gained more than four percent last week, after the US. Federal Reserve Chairman Ben Bernanke refused to commit to begin reducing quantitative easing this year, defying expectations for a $10-billion cut to the $85 billion bond-buying stimulus.

Ultra-loose monetary policy has been a key driver of higher gold prices in recent years, as it keeps up pressure on long-term interest rates, keeping the opportunity cost of holding bullion low, while stoking fears of inflation.

But uncertainty over the timing of the move has led to choppy trading over the past few sessions.

Investors are watching US. economic numbers to determine whether the bank could still begin reducing its bond purchases this year.

The final reading of US. second quarter gross domestic product is due later on Thursday, followed by a key non-farm payrolls report next week.

Stronger-than-expected data would likely reignite speculation that the Fed could announce a stimulus reduction in December, or even next month, supporting the dollar and in turn weighing on gold prices.

WEAK PHYSICAL BUYING

Chinese markets will be closed next week for the National Day holiday, keeping

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