Gold lower on U.S. political stalemate, Fed stimulus outlook

Gold traded lower throughout the Asian and early European trading sessions as U.S. lawmakers took steps toward breaking through the budget stalemate and raising the nations debt ceiling amid broad expectations that the October 17 deadline wont be breached. FOMCs September meeting protocols due to be released today also fell in investors focus.

On the Comex division of the New York Mercantile Exchange, gold futures for December settlement fell by 0.33% to $1 320.20 per troy ounce at 8:22 GMT. Prices held in range between days high and low of $1 322.00 and $1 316.30 an ounce respectively. The precious metal fell by 0.2% on Tuesday and trimmed its weekly advance to 0.6%.

Gold extended its fall on Wednesday after U.S. lawmakers took some steps toward raising the government’s borrowing limit. President Barack Obama said on Tuesday he would be willing to hold discussions over the U.S. budget, if Republicans agree to re-open the government and raise the debt ceiling. Meanwhile, Republican House Speaker John Boehner rejected the president’s stance that he’ll only talk when his terms are met and insisted on immediate negotiations.

Golds gains however remained limited amid broad expectations that the political impasse will be resolved before breaching the October 17 deadline, despite some expected volatility during the process. Analysts focus remained on Feds timeline to taper its monetary easing program with the FOMCs October meeting drawing closer and the committees September meeting protocols being released today.

Mark To, head of research at Wing Fung Financial Group, in Hong Kong, said for Bloomberg: “Gold’s direction will come from how people view the possibility that the Fed’s tapering of its bond-buying program begins this year. Gold is finding some support from the U.S. budget impasse.”

The metal was expected to draw support from increased physical demand from China after markets in the Asian country reopened on Tuesday following the end of the Golden Week holiday. Buying in Shanghai however was muted. The metal traded with no distinct direction after the lapse of government funding in the U.S. delayed the release of key economic data, including Friday’s highly anticipated September unemployment rate and non-farm payrolls and Tuesday’s U.S. trade deficit.

ANZ analysts said: “The return of China yesterday to the gold market resulted in little price action. With the spot gold price around $20 an ounce lower than when (the holidays) began, the market was hoping for a bit of a bounce, but this didnt eventuate.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell to 898.18 tons yesterday after remaining unchanged for three days at 899.99 tons. This was the lowest since February.

Elsewhere on the precious metals market, silver, platinum and palladium also fell. Silver futures for settlement in December declined by 0.37% to $22.360 an ounce and held in range between days high of $22.225, near yesterdays 2 1/2-week high, and low of $22.408 per ounce. Platinum for delivery in January traded at $1 400.15 an ounce, down 0.25% on the day. The precious metal shifted between session high and low of $1 405.30 and $1 397.30 an ounce respectively. Palladium December futures stood at $710.60 an ounce, down 0.59% on the day, and held in days range between $714.30 and $708.60 per troy ounce.