Gold Declines as President Says U.S. Lawmakers Reach Deal on Debt Ceiling

Gold declined from a record as President Barack Obama said that U.S. lawmakers reached a deal to increase the nation’s debt limit and cut the federal deficit, averting a default tomorrow and eroding demand for haven assets.
Gold for immediate delivery lost as much as 1.3 percent to $1,607.45 an ounce, and traded at $1,613.65 at 2:36 p.m. in Singapore. Spot gold, which reached an all-time high of $1,632.80 on July 29, advanced 8.5 percent last month on concern that sovereign-debt crises in the U.S. and Europe may derail the global economic recovery.
“Gold reached a record because U.S. politicians didn’t seem to be getting anywhere with their negotiations and now that they have an agreement, gold will be knocked back a little,” said Steven Zhu, operations manager at Yinjian Futures Co.
Republicans and Democrats may vote today on the measure, which would raise the debt ceiling by at least $2.1 trillion, and slash government spending by $2.4 trillion or more. Lawmakers should “do the right thing,” Obama said from the White House late yesterday.
The U.S. is set to join countries in Europe including Greece in reducing spending to bring budget deficits under control. Greek lawmakers on June 29 backed a 78 billion-euro ($113 billion) austerity plan that was a condition for receiving another European Union bailout.
Gold for December delivery in New York shed as much as 1.4 percent to $1,608.20 after rallying to an all-time high of $1,637.50 on July 29. Twenty of 33 traders, investors and analysts surveyed by Bloomberg, or 61 percent, said bullion will fall this week. Ten predicted higher prices and three were neutral.

Uptrend Intact

“We all knew the U.S. politicians would reach a deal by Aug. 2,” Zhu said from Shanghai. “However, problems still exist within the economies of the U.S. and Europe and that will keep gold’s uptrend intact.”
Exchange-traded product holdings climbed for a fifth day on July 29, reaching a record 2,152.222 metric tons, Bloomberg data show. Hedge funds and other money managers lifted their net-long gold positions by 7 percent to 235,617 contracts in the week to July 26, data from the U.S. Commodity Futures Trading Commission showed.
Cash silver dropped as much as 1.4 percent to $39.315 an ounce. Spot platinum gained 0.8 percent to $1,795.25 an ounce, and palladium advanced 1.1 percent to $840.50 an ounce.

source: http://www.bloomberg.com/