Orlando, Florida 11/10/2013 - Gold futures sold off in the US on Friday in anticipation of temporary debt ceiling patch before the October 17 deadline.
Gold prices on the Comex division of the New York Mercantile Exchange were last down $29.20 at $1,267.70 per ounce. Trade has ranged from $1,259.60 to $1,294.80.
House Republican leaders and President Barack Obama ended a 90-minute meeting at the White House Thursday night, after which House Speaker John Boehner said that the Republicans might be able to pass a short-term increase to the debt ceiling if the President would agree to negotiate to end the budget impasse and government shutdown.
“Clearly gold prices have been undermined by the 'apparent' progress toward a debt ceiling deal,” the CME Group said in a market commentary.
“However, it is possible that gold prices and other physical commodity markets are being undermined by the idea that the coming deal will only be a short-term six-week deal, as that means the cloud hanging over the global economy from Washington won't fully dissipate completely,” it added.
A stop-gap measure would not actually resolve the budget crisis because a new debt ceiling could be reached again in the second half of November, Commerzbank agreed.
“Amidst this ongoing uncertainty, it is increasingly unlikely that the US Federal Reserve will begin scaling back its bond purchases before this year is out. Were the situation in the US to escalate again, the Fed might even resort to further expansionary monetary policy measures. This should lend support to the gold prices,” Commerzbank said.
“In the short term, however, the desire to sell is still clearly predominant, as evidenced among other things by outflows of 1.8 tons from the SPDR Gold Trust,” the broker added.
Meanwhile, the gold chart looks “horrid” and is set to worsen during New York trade, Dennis Gartman, editor of the Gartman Letter, said.
“This is Friday, and Fridays have tended in recent weeks and months to be days when the long-standing bulls finally chose to give up and when the bears choose again to show their strength. It may not be pretty,” Gartman said.
In wider markets, ever since reports emerged yesterday that a compromise might be reached in the US budgetary dispute, risk appetite among market participants has been growing, something that is also reflected in firm equity markets, Commerzbank said.
The Dow Jones industrial average and S&P 500 were last up 0.36 percent and 0.22 percent respectively, while the most actively traded Comex copper contract was at $3.2370 per pound, down 1.15 cents.
As for the other precious metals, Comex silver prices for December delivery were down 66.6 cents at $21.230 per ounce. Trade has ranged from $20.950 to $21.860.
(Editing by Mark Shaw)