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Gold gains as market digests deal to end U.S. fiscal impasse

CommoditiesOct 16, 2013 03:07PM ET
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This article has already been saved in your Saved Items - Gold prices edged higher on Wednesday after Senate Democrats and Republicans agreed on a spending package that was seen winning approval in the House of Representatives.

The deal sent the dollar rallying early though the greenback gave back its gains as markets digested the deal, which was yet to be approved at the time of writing.

Gold and the dollar tend to trade inversely with one another.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,281.80 during U.S. afternoon hours, up 0.68%.

Gold prices hit a session low of USD1,268.80 a troy ounce and high of USD1,287.10 a troy ounce.

Gold futures were likely to find support at USD1,251.10 a troy ounce, Tuesday's low, and resistance at USD1,289.70, Monday's high.

The December contract settled down 0.27% at USD1,273.20 a troy ounce on Tuesay.

Senate Majority Leader Harry Reid, a Democrat, and the Senate's top Republican, Mitch McConnell, agreed on a plan to end the U.S. fiscal impasse and reopen the government as well as extend Washington's borrowing authority to avoid defaults.

The dollar saw support on expectations that the House of Representatives may give the proposal the green light possibly today, though it gave back gains as markets were already expecting a last-minute compromise similar to the debt-ceiling debates of 2011 and the fiscal cliff deal in late 2012, which gave many an excuse to ditch the safe-haven greenback and go long on stocks and other higher yielding asset classes.

U.S. credit ratings agency Fitch Ratings on Tuesday placed the U.S. 'AAA' debt on "rating watch negative" due to congressional inability to pass a spending package.

The budget deal will reportedly give the Treasury the authority to continue borrowing through Feb. 7 and fund the government through Jan. 15, but will also add in spending cuts, which appeased Republicans.

Elsewhere, the Federal Reserve reported in its Beige Book, which analyzes current economic conditions, that the U.S. economy expanded at a moderate pace from September into October, though the U.S. central bank said fiscal uncertainty was dampening recovery.

Markets bet that with end to such fiscal uncertainty growing increasingly likely, recovery may pick up down the road, which further fueled the risk-on trading session that bolstered gold and softened the dollar somewhat.

Elsewhere on the Comex, silver for December delivery was up 0.86% at USD21.373 a troy ounce, while copper for December delivery was up 0.15% and trading at USD3.313 a pound.

Gold gains as market digests deal to end U.S. fiscal impasse

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