Gold Advances Most in a Week on U.S. Government Shutdown Concern

Gold advanced the most in a week as U.S. lawmakers struggled to reach an accord on raising the nation’s debt limit, increasing demand for the precious metal as a haven.

With the U.S.’s borrowing authority set to lapse Oct. 17, Senate Majority Leader Harry Reid said yesterday that he had a “productive conversation” with Minority Leader Mitch McConnell, without reaching a conclusion on a plan to send to the chamber for a vote. Bullion dropped to a three-month low last week on speculation that the lawmakers would reach an agreement to raise the debt ceiling and end a government shutdown.

“Demand for gold is on the rise as it’s not apparent anymore that the parties will reach an agreement before the deadline,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview.

Gold futures for December delivery added 1.1 percent to $1,282.60 at 9:40 a.m. on the Comex in New York, heading for the biggest jump for a most-active contract since Oct. 7. Trading was 26 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

“We’re seeing some quite good physical demand at these levels,” Bernard Sin, head of currency and metal trading at bullion refiner MKS (Switzerland) SA in Geneva, said by telephone. “The U.S. is the main story, focusing on the developments around the shutdown. Prices will continue to be volatile.”

Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on speculation that the Federal Reserve will slow debt purchases. The U.S. government has been partially shut since Oct. 1 after lawmakers failed to pass a budget.

Silver futures for December delivery rose 1.2 percent to $21.515 an ounce in New York.

Source