IV:Gold futures rally as dollar weakens after U.S. impasse ends
Investing.com - Gold futures rallied to a more than one week highs on the back of a broadly weaker dollar on Thursday, as initial relief over a deal to avoid a U.S. default was overshadowed by concerns about the economic impact of the two-week government shutdown.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,306.7 a troy ounce during European late morning trade, advancing 1.90%. Prices traded in range between USD1,273.8 a troy ounce, the daily low and a session high of USD1,320.4 a troy ounce.
The December contract ended 0.25% lower on Wednesday to settle at USD1,279.10 a troy ounce.
Gold futures were likely to find support at USD1,273.8 a troy ounce, the session low and resistance at USD1,322, the high from October 9.
The dollar initially strengthened after the U.S. Congress passed a bill to reopen the government and raise the debt ceiling, just hours ahead of a deadline to avert a debt sovereign debt default.
The deal will fund the government until January 15 and raise the government borrowing limit until February 7. Both sides also agreed to talks over broad budget issues in an attempt to reach a longer-term deal by December 13.
Safe haven demand for gold was boosted by concerns over the impact of the government shutdown on the already fragile economic recovery, which could prompt the Federal Reserve the delay plans for scaling back its stimulus program until at least early next year.
The possibility of another debt crisis also loomed, as the temporary solution does not resolve the underlying budgetary issues dividing Republicans and Democrats.
The dollar also came under pressure after Chinese rating agency Dagong cut its sovereign rating on the U.S. to A- from A, saying that while a default has been averted the fundamental situation of debt growth outpacing fiscal income and GDP remains unchanged.
Gold investors were waiting for upcoming U.S. economic data releases, which had been delayed due to the shutdown, to determine the impact of the debt crisis on the economic outlook and the Federal Reserve's stimulus program.
Elsewhere on the Comex, silver for December delivery jumped 1.77% to trade at USD21.743 a troy ounce, while copper for December delivery was down 0.86% to trade at USD3.280 a pound.
