Gold steadies after hitting 3-month low
Gold fell to a three-month low as Senate Democrats and Republicans coalesced to end the first government shutdown in 17 years. Senate leaders are working on a deal to reopen the federal government and avoid a breach of the debt limit just days before the October 17 deadline.
Gold futures steadied after falling sharply. COMEX rose more than 0.3 percent to 1,277.70 an ounce as market participants anticipate an end to the budget impasse. Growing optimism that a deal can be reached has lowered the bid for the once mighty safe haven, which has struggled for most of the year. Gold for December delivery fell to a low of $1,251 early in the New York session, the lowest for an active contract in more than three months. Trading was almost 40 percent higher than the three-month average, according to Bloomberg.
Market participants are growing more confident a short-term resolution to the budget impasse will occur before the October 17 deadline, giving Congress more time to iron out the details of the government’s borrowing authority. This will likely keep gold on the downward trend. The yellow metal is heading for its first annual drop in 13 years, having fallen 24 percent this year.
Investors lost faith in the yellow metal amid growing speculation the Federal Reserve will begin scaling back the pace of asset purchases, which would increase the opportunity cost of holding onto gold. The central bank surprised the markets by keeping the pace of its $85 billion monthly asset purchases unchanged at its September policy meetings.
In other trading, silver for December delivery fell more than 0.5 percent to $21.23 an ounce. The grey metal has become a more attractive buy for investors due to its industrial benefits, especially in the automotive, chemical and electronics industries.
The commodity markets are likely to remain under pressure this year, as investors look for higher yields elsewhere. As Democrats and Republicans look for a common resolution to the budget impasse, the market will remain volatile, as investors react to the latest revelations.
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