10-11-13 10:33 AM EDT | Email Article
   By Matt Day 
 

NEW YORK--Gold futures careened to the lowest price in three months Friday as the potential for an end to the political gridlock in Washington curbed demand for the perceived safe-haven asset.

The most actively traded contract, for December delivery, recently traded down 2.3%, or $30.10, at $1,266.80 a troy ounce on the Comex division of the New York Mercantile Exchange. Futures fell as low as $1,259.60 a troy ounce, the lowest intraday price since July 10.

House Republicans met with President Barack Obama on Thursday to offer a six-week extension of the nation's debt ceiling in exchange for budget-cut talks. The meeting ended without a deal, but was widely seen as a political thaw after weeks of stalemate in Washington.

Parts of the federal government have been shut down since last week, and the U.S. borrowing limit is expected to arrive next week, risking a default if a deal to raise the limit is not reached.

Some investors buy gold as a hedge against political or economic turmoil, and relative calm in financial markets even as the U.S. government shutdown has gold futures poised for a fourth consecutive loss.

"It's going to be negative for gold if you see the debt ceiling resolved and the government reopened," said Thomas Capalbo, a precious metals broker with Newedge.

Exchange operator CME Group Inc. (CME) briefly halted gold trading as prices slumped in heavy volume on Friday morning, a spokesman said.

Stop Logic, a type of circuit breaker that pauses trading for between five and 20 seconds in an attempt to prevent excessive volatility, was triggered in the December-delivery gold futures contract at 8:42 a.m. EDT and lasted for 10 seconds, the spokesman said. Futures fell by $14.50 an ounce in that minute.

Bigger picture, "there's a huge disappointment with gold's inability to rally or sustain a rally off the backdrop of the debt ceiling" debacle, said Graham Leighton, director of precious metals trading with brokerage Marex Spectron.

Gold is down 23% this year largely as investors anticipate an end to the Federal Reserve's stimulus, as well as rising higher interest rates. Rising rates make zero-yielding assets like gold less appealing, analysts say.

Under that pressure, gold's moments of strength this year on the U.S. debt ceiling, slowing growth, and escalating crisis in Syria, have proved fleeting.

 

--Tatyana Shumsky contributed to this article.

Write to Matt Day at matt.day@wsj.com

 

(END) Dow Jones Newswires

October 11, 2013 10:33 ET (14:33 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
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