Gold rises on U.S. budget stalemate, economic data

Gold rose on Thursday as investors weighed growing concern over a U.S. government shutdown against prospects for Fed commencing Quantitative Easing tapering by the end of the year. GDP data remained in market players focus. Silver and platinum rose, while palladium fell.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December rose by 0.11% to $1 337.70 per troy ounce at 7:54 GMT. Prices held in range between days high and low of $1 339.60 and $1 329.20 an ounce respectively. The precious metal rose by 0.5% on Wednesday and extended its weekly advance to over 0.8% following Thursdays gains.

Market players turned to gold amid uncertainty whether the U.S. Congress will pass a budget for the next fiscal year starting on October 1, which could lead to a government shutdown. Lawmakers are in a conflict over whether to stop funding the health-care overhaul started in 2010, known as Obamacare.

Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, said for Bloomberg: “The fiscal crisis that’s slowly engulfing the U.S. is starting to support the metal. Prices can’t go down and can’t go up. The market is 100 percent undecided.”

Mixed comments by Fed officials also added to the uncertainty on the market. On Monday, Federal Reserve Bank of New York President and vice chairman of the FOMC William Dudley said that policy makers must forcefully push against headwinds. “The economy still needs the support of a very accommodative monetary policy,” Dudley said. “Improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions are pulling the economy in opposite directions, roughly canceling each other.”

Meanwhile, Atlanta Fed President Dennis Lockhart said that monetary policy should focus on creating a more dynamic economy. He also backed Fed’s bond purchasing program.

This comes after St. Louis Fed President James Bullard said on Friday that the Federal Reserve could still trim its monetary easing program in October if economic data lay support. “October is a live meeting,” he said for Bloomberg. “I’m not saying it’s going to happen, but the possibility exists.”

Data showed yesterday that U.S. Durable Goods Orders advanced 0.1% in August, beating expectations for a 0.1% decline. Julys reading received a downward revision to a 8.1% contraction after the initial estimate at -7.3%. At the same time, New Home Sales reached a 0.421 million annual rate in August, compared to forecast for rising to 0.420 million. Julys reading was revised downward to 0.390 million new homes sold from initially estimated at 0.394 million.

Investors will be keeping a close watch to this week’s upcoming key U.S. data to gauge the strength of the U.S. economy and tapering prospects. On Thursday, the final reading of the Q2 Gross Domestic Product is expected to show a 2.6% expansion from the previous year after the preliminary revised reading showed a 2.5% growth. Final consumer spending (Personal Consumption Expenditures – PCE) likely grew by 1.8% in the second quarter, while the core value surged 0.8%. Also on Thursday, weekly initial jobless claims data is expected to show an increase to 325 000 from 309 000 claims filed in the preceding week, while pending homes sales may have decreased by 1% in August after falling 1.3% in July.

Elsewhere on the precious metals market, silver futures for delivery in December rose by 0.15% to $21.918 per ounce at 7:55 GMT and held in range between days high and low $21.970 and $21.673 an ounce respectively. Platinum January futures traded at $1 436.15 an ounce, up 0.27% on the day, and shifted between high and low of $1 436.60 and $1 427.15 per ounce. Palladium for delivery in December slipped 0.12% to $724.80 an ounce and held in a narrow days range between $725.20 and $721.70 per ounce.