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Gold futures rise on US debt ceiling debate

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Gold futures rise on US debt ceiling debate

Escalating tensions concerning the US debt ceiling drove gold futures higher for the first time in the last four sessions, as market participants weigh the likelihood of a US government shutdown.

The US federal government is at risk of shutting down October 1 if the House of Representatives fail to reach an agreement to raise the debt ceiling. A failure to raise the debt cap could force the Treasury to default on the nation’s $16.7 trillion debt.

“Worries about the US government shutting down are pushing people to gold,” according to senior commodity broker Phil Streible of R.J. O’Brien & Associates. Gold futures advanced 1.3 percent to 1,333.30 an ounce after falling more than 3.1 percent over the previous four days. Gold futures have been under pressure as market participants continue to weigh the Federal Reserve’s next course of action. In a Monday speech Fed Bank of New York President William Dudley said a cut to record stimulus at one of the next two FOMC meetings shouldn’t be ruled out. Dudley is scheduled to speak again Friday. Fed Bank of Chicago President Charlie Evans and Fed Bank of Boston President Eric Rosengren will also speak on Friday.

Accompanying gold’s rally were other precious metals, including silver and copper. COMEX silver advanced more than 0.9 percent to $21.79 an ounce. Copper for December delivery advanced 0.5 percent to $327.20 a pound.

Gold’s rally comes as more market participants are writing off the yellow metal. Expectations for a Federal Reserve asset taper have created hostile conditions for the former safe haven. The yellow metal has suffered from declining demand from emerging markets, having fallen to $1,221.40 in June, a 34-month low. Year-on-year, gold prices have declined almost 25 percent. Bullion was valued at $1,763.80 an ounce one year ago.

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