Gold fluctuates on Fed stimulus outlook, U.S. budget stalemate

Gold swung between gains and losses on Friday as investors weighed the prospects of Fed paring its monetary easing program in the fourth quarter against the possibility of a government shutdown if Congress fails to pass a budget for the 2014 fiscal year beginning October 1.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December rose by 0.21% to $1 326.90 per troy ounce at 7:38 GMT. Prices held in range between days high and low of $1 328.30 and $1 320.60 an ounce respectively. The precious metal fell by 0.6% on Thursday but erased its weekly decline following Fridays rebound and rose nearly 0.1% on weekly basis.

Gold swung between gains and losses on Friday as investors weighed tapering prospects following Thursdays overall upbeat U.S. data against the possibility of a government shutdown if the budget for the next fiscal year doesnt pass in time. Speculations arose that the Federal Reserve might commence decelerating its Quantitative Easing program in the fourth quarter after a batch of overall upbeat data on Thursday indicated a consistent recovery of the U.S. economy.

The U.S. Department of Labor reported that the number of people who filed for initial jobless payments in the week ended September 21 hit a six-year low, supporting the outlook for tapering in the near future. The report showed that 305 000 claims were filed last week, confounding analysts’ expectations for a surge to 325 000 from last week’s upward revised 310 0000 claims filed. The five-week average, which irons out weekly volatility, fell to 308 000 claims from 315 000 in the preceding week.

A Labor Department official said that California and Nevada, which experienced difficulties in processing their claims in the past two weeks due to computer updates, have caught up with the recent backlog and all the data has been processed and is exact.

A separate report showed that year-on-year, the U.S. economy grew by 2.5% in the second quarter, matching its revised preliminary reading. This was a bigger expansion than in the first three months of the year and was considered by analysts as respectable growth given the increased taxes in January and reduced federal budget in March.

However, the National Association of Realtors said that U.S. Pending Home Sales fell by 1.6% in August, underperforming analysts’ projections for a 1% decrease. At the same time, the Commerce Department said that its price index for purchases of goods and services by the American households fell by 0.1% on annual basis in the second quarter, the first decline in four years. Core personal consumer spending, which excludes the more volatile energy and food expenditures, rose only by a 0.6% annual rate in April-June, underperforming expectations and the preceding period’s 0.8% advance.

Budget impasse

Losses however were offset amid uncertainty whether U.S. lawmakers will pass a budget for the 2014 fiscal year beginning on October 1. The lack of agreement on the conflict over whether to stop funding the health-care overhaul started in 2010, known as Obamacare, has kept Congress from voting. Separately, lawmakers must vote to raise the countrys borrowing ceiling. Treasury Secretary Jacob Lew said that measures to avoid exceeding the debt limit will be exhausted by October 17.

Elsewhere on the precious metals market, silver fell, while platinum and palladium advanced. Silver futures for December settlement fell by 0.50% to $21.655 per ounce at 7:26 GMT. Prices held between days high of $21.770 and a one-week low of $21.543. Platinum for delivery in January traded at $1 418.65 per ounce, up 0.28% on the day. The metal ranged between session high at $1 420.35 and a six-week low of $1 401.20 an ounce. Palladium futures for December settlement traded at $725.00 an ounce and held in days range between $725.70 and $720.60 per troy ounce.