Gold trims weekly decline as shutdown continues

Gold marked a slight advance on Friday amid a weak U.S. dollar as the U.S. government shutdown entered a fourth day with prospects for extending into next week. Political wrangling over raising the nations debt limit on October 17 boosted further concern over the U.S. economic growth. Silver fell, while platinum and palladium rose.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December rose by 0.05% to $1 318.30 per troy ounce at 7:51 GMT. Prices held in a range between days high and low of $1 320.40 and $1 314.90 per ounce respectively. The precious metal rose by 0.1% on Thursday and trimmed its weekly decline to 1.4% after gaining on Friday.

Gold futures remained supported as the U.S. government shutdown continued for a fourth day with outlook for an extension into next week after President Barack Obama failed to break through the budget talks impasse on Wednesday at a meeting with leaders of the Republicans and Democrats. Meanwhile, concern over a deadlock in the discussions for raising the nation’s debt limit on October 17 boosted market sentiment. A U.S. default would have much worse consequences for the U.S. economy than the current budget standoff.

The Treasury said in a report yesterday that a default caused by Congress failing to raise the debt ceiling would lead to a recession as bad as the 2008 financial crisis.

Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. wrote in a note: “The market feels a little directionless, and the safe-haven bid around the U.S. debt ceiling remains absent. ETF holdings also continue to trickle lower and it will be difficult to justify a gold rally in this environment.”

Assets in the SPDR Gold Trust fell for a second consecutive day to 899.99 tons yesterday from 901.79 on Wednesday, data on the web site showed. Assets in the biggest bullion-backed ETP have decreased by 33% this year after investors lost their faith in gold as a store of value.

Analysts however remained bullish for a third week, the longest run since July, amid expectations for further wrangling on the U.S. budget and debt ceiling. According to a Bloomberg survey, eighteen out of 24 participants in the poll expected prices to surge next week. Two economists wagered that the metal will decline, while four remained neutral.

The dollar index, which measures the greenbacks performance against six major peers, was unchanged on the day at 79.87. The December contract held in a narrow range between 79.88 and 79.78. The U.S. currency gauge fell by 0.2% on Thursday, a fifth consecutive daily decline, and extended its weekly decline to 0.6% after hitting several multi-month lows in the past days.

Gold was pressured yesterday after the Labor Department reported that the number of U.S. citizens who filed for initial jobless benefits rose at a minor pace last week but remained at pre-recession levels, indicating a relative strength in the labor market’s recovery. The data was overall consistent with Wednesday’s ADP employment change that showed an improvement but underperformed expectations. The government agency reported that last week’s initial jobless claims rose to 308 000, outdoing projections for a surge to 315 000. The preceding period’s reading received an upward revision by 2 000 to 307 000.

Market players will be watching closely for today’s unemployment rate and non-farm payrolls data, which however may not be published as the government remains shut. An Obama administration official announced earlier in the week that there might be a delay, providing the ADP employment change and initial jobless claims indicators out this week with more weight on current market sentiment.

Elsewhere on the precious metals market, silver futures for delivery in December fell by 0.37% to $21.705 an ounce at 8:09 GMT. Prices held in range between days high and low of $21.752 and $21.590 an ounce. Platinum futures for settlement in January traded at $1 381.00 an ounce, up 0.56% on the day, and shifted in a days range between $1 384.80 and $1 372.50 per ounce. Palladium for delivery in December rose by 0.40% to $703.00 per troy ounce and ranged between session high and low of $704.60 and $701.40 respectively.