SINGAPORE, Oct 16: Gold steadied on Wednesday after falling early in Asian hours, with U.S. Lawmakers scrambling to come up with a bipartisan agreement to increase the federal debt ceiling before a Thursday deadline.
Democratic and Republican leaders in the U.S. Senate could announce a deal soon to extend the government’s borrowing authority until Feb. 7 and quickly re-open federal agencies that have been closed since Oct. 1, a Senate aide said.
That came after a chaotic day in which two House plans failed and Fitch Ratings warned it could cut the sovereign credit rating of the United States from AAA.
Spot gold had risen 0.09 percent to $1,281.34 an ounce by 0236 GMT, after gaining 0.6 percent on Tuesday as some safe-haven buying emerged.
‘For the next two days, we expect that short-term rebound (in gold) to be boosted by risk aversion,’ said Chen Min, precious metals analyst at Jinrui Futures in Shenzhen.
‘However, it is insufficient to change the route of gold since historically political risks have had little impact in the medium to long-run, and the issues will be solved at the last moment.’
Nomura Securities said on Tuesday that gold tends to remain flat or to drop slightly in the lead-up to events such as a potential U.S. Default, with a chance of some upside in their wake.
During the last political debate over raising the debt ceiling, gold hit an all-time high of $1,920 after Standard & Poor’s downgraded its U.S. Credit rating a few days after Congress raised the limit at the 11th hour.
PHYSICAL BUYING
Demand picked up as gold prices traded near three-month lows with premiums – the best way to measure demand – rising in Asia.
Gold premiums in India, the world’s biggest buyer of the precious metal, hit a record $100 an ounce on a shortage of supplies to meet festival demand.
In China, premiums in the Shanghai Gold Exchange climbed to over $20 an ounce from about $7 seen two weeks earlier. (AGENCIES)
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