Commodities volatile amid US debt ceiling impasse, gold consolidates

The volatility extends across the board and dominates markets with the focus on the impasse in US debt ceiling talks, with a looming government shutdown as the US is about to exhaust its borrowing capacity. Precious metals, gold and silver, are consolidating early trade hours in London, while industrial metals are biased slightly higher led by copper.

The market remains mixed amid extensive talks in Capitol Hill. President Obama was very clear, and Democrats put their foot down, they are not negotiating the debt ceiling, keeping the pressure on Republicans that are still looking for the means to block Obama’s healthcare reform in exchange for other party advantages.

- Gold was trading higher by 0.09% at $ 1338.04

- Silver was trading higher by 0.10% at $21.92

A divided Congress is not something the market would like to see, risking further the odds for a US default shall policy makers fail to reach a deal to raise the statutory borrowing limit by mid-October. Treasury Secretary Jack Lew warned of the impending crisis and the risk of US default shall policy makers fail to reach a deal in time to raise the borrowing capacity currently at $16.7 trillion.

Gold is still favored for gains as far as the metal consolidates above $1330 areas and likely to offer demand base for the metal to head higher eying 1345-50 areas.

Silver on the other end is still caught between a tight range, struggling between the appeal as a precious metal and industrial qualities, keeping the metal confined in a tight range. Silver traded to the upside in early hours but holding below $22.00 areas and unless we see a solid breakout above this barrier it will keep silver confined held from below by 21.50-30.

- Copper LME 3Mnth traded higher by 0.71% at $7194.50 a metric ton

- COMEX Copper traded higher by 0.78% at $3.9275 a pound

As for industrial metals, copper was biased higher this morning ahead of a week-long holiday in China, the biggest consumer. Demand outlook for copper remains uncertain with mixed signals from the biggest consumers and fears over the outlook for global recovery, especially as US debt woes weigh.

The focus will remain on the US debt ceiling talks, and the looming government shutdown offsetting for now the focus on the outlook for Fed monetary policy, which already buoyed precious metals higher on prospects for continued accommodative policies by the Fed in the coming period.

Investors will focus on data from the US today with the third and final revision for GDP growth for the second quarter alongside the inflation gauge, the PCE and any weaker than expected figures will also renew focus on the Fed and confirm their bias toward keeping the accommodative policies and refraining from tapering for now.