Gold retreats as investors see budget impasse resolved soon

Gold retreated on Thursday after advancing the most in two weeks on Wednesday as investors assessed the chance of a possible protraction of the government shutdown and its impact on the U.S. economy. Silver, platinum and palladium tracked golds downward momentum.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December fell by 1.04% to $1 306.90 per troy ounce at 10:25 GMT. Prices held in range between days high and low of $1 317.00 and $1 307.70 per ounce respectively. The precious metal rose by 2.1% on Wednesday, the biggest daily advance since September 18, but extended its weekly decline to over 2.3% after falling on Thursday.

The U.S. federal government shutdown continued for a third day after President Barack Obama failed to break through the budget talks impasse on Wednesday at a meeting with leaders of the Republicans and Democrats. Investors however expected an exit of the deadlock in the near future, putting a lid on gold gains. More worries are to come if the shutdown extends into next week.

Mark To, head of research at Wing Fung Financial Group in Hong Kong, said for Bloomberg: “The market expects a short shutdown that will have a minimal impact on the broader economy and doesn’t change the Fed’s timetable on tapering. If the budget standoff stretches into next week, it could begin to negatively impact the economy, and the demand for a safe haven will support gold.”

The precious metal received a further boost yesterday after a report by a payrolls processor showed that U.S. companies added less jobs than expected in September, indicating a still fragile labor market prior to Friday’s unemployment rate and non-farm payrolls. Automatic Data Processing Inc. together with Moody’s Analytics reported that private employers created 166 000 jobs in September, underperforming expectations for an increase to 175 000. August’s reading received a downward revision to 159 000 after being initially estimated at 176 000.

The report also showed that payrolls in the service sector rose by 147 000 in September, while employers in the manufacturing and other goods-producing industries added 19 000 jobs. Employment in factories and construction rose by 1 000 and 16 000 respectively, while headcount in the financial services was reduced by 4 000. A notable increase was marked by small employers who created 74 000 jobs, more than both medium and large businesses.

An Obama administration official announced that the Labor Department will defer releasing its monthly employment statistics, if the federal government shutdown persists. This means that yesterday’s employment numbers will be the only ones before a budget for the new fiscal year passes, providing it with additional weight on the market sentiment and boosting speculation for a further delay of Fed taper.

Elsewhere on the precious metals market, silver for delivery in December fell by 1.37% to $21.598 per ounce at 10:23 GMT. Prices held in range between days high and low of $21.810 and $21.517 an ounce respectively. Platinum retreated by 0.93% to $1 380.85 an ounce and varied in days range between $1 394.90 and $1 378.25. Palladium December futures traded at $714.80, down 0.89% on the day, and ranged between days high and low of $720.80 and $713.70 per troy ounce.