The political impasse in Washington prompted gold futures to edge down in value on Tuesday as the ongoing government shutdown of the globe's largest economy also is likely to influence the U.S. Federal Reserve's decision about tapering monetary stimulus measures, according to Bloomberg.
For one week as of Tuesday, the U.S. has been operating under the circumstances of a partial government shutdown. Coming due next Thursday is a pact between lawmakers feuding over the budget and fiscal issues regarding the increase of the debt ceiling.
The yellowish metal is less than three months from ceasing its annual-gain streak at 12 years as many investors have abandoned bullion as an asset haven. Commodities research head Jeffrey Currie with Goldman Sachs Group Inc. predicted that the precious metal will continue its downward dive next year because lawmakers will resolve the budgetary and debt ceiling issue, which will aid the U.S. economy's recovery.
"Although there is recognition of short-term upside risks, the expectation that pressure will eventually resume as talk of quantitative-easing tapering regains traction has likely encouraged selling into rallies for now," states a Tuesday report authored by analyst Joni Teves with UBS AG in London, according to Bloomberg. "That several U.S. data releases have been temporarily put on hold due to the government shutdown further clouds investors' ability to formulate strong views at this stage."
At 9:27 a.m. on Tuesday, gold futures edged up 0.03 percent, a 40-cent lift to $1,323.50 per troy ounce.
Asian nation spurs gains
Markets in China, the globe's second largest consumer of gold behind India, re-opened on Tuesday following a week of observation of National Day.
China also hosts the world's second-largest economy, trailing only that of the U.S. As of late, the country has released economic data that suggests it is stabilizing after having endured a rough patch.
Dealers in Hong Kong told the news source that they have been seeing a strong level of acquisitions from buyers in China. But that demand was not fervent enough to spur large gains for the precious metal.
Demand is beginning to manifest in India as the seasons for weddings and festivals arrives. Importers of gold in India have begun seeing increased numbers as far as orders are concerned.
But the ongoing strife between political parties in the U.S. is impacting the performance as of late of gold futures.
Debt ceiling deadline nears
Presently standing at $16.7 trillion, the debt ceiling in the U.S. must be raised by next Thursday, October 17.
Reuters reports some analysts are apprehensive about progress with that discussion given the budgetary challenges currently in place. Hanging in the balance is the possibility that the U.S. might default on financial obligations for the first time ever.
"There won't be any default on the U.S. debt as I don't think Congress will want to take that risk. We will probably have a last minute agreement," economist Alexis Garatti with Haitong International Research in Hong Kong told Reuters on Tuesday. "In the very short term, we expect gold prices to increase because of the surge in risk aversion. But we expect an agreement before the 17th, so gold will retreat to levels seen in the beginning of the month."
Gold futures have lost 0.1 percent since September 30, one day prior to when the U.S. government shutdown began, according to The Wall Street Journal.
And thus far this year, gold futures are down more than 20 percent.
"You're seeing some fear supporting gold now, but gold is still in a down market," senior market strategist Bill Baruch with futures brokerage iiTrader in Chicago told The Wall Street Journal on Tuesday.
The record price for gold futures is $1,923.70 per troy ounce as established in September 2011.
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