SINGAPORE, Reuters (21/10) - Gold edged up to near one-and-a-half-week
highs above $1,300 an ounce on Monday, supported by expectations the
Federal Reserve would hold off curbing its economic stimulus while the
United States eyes a more lasting fix to its budget problems.Gold posted its best weekly gain in two months last week as bets grew
that the Fed would postpone tapering its bond-buying as focus turns to
finding a more permanent solution to Washington's fiscal woes. The
U.S. budget deal last week extends the U.S. government's borrowing
authority through Feb. 7 and restores federal funding through Jan. 15,
threatening a further crisis early next year.Spot gold was up
0.3 percent at $1,319.49 an ounce by 0624 GMT. The metal touched
$1,325.21 on Friday, its highest since Oct. 8. It rose 3.4 percent last
week. U.S. gold futures gained 0.4 percent to $1,319.60 an ounce.Silver outperformed gold, with spot up 1.4 percent at $22.18 an ounce and U.S. futures also rising 1.4 percent to $22.21.'Given the U.S. government shutdown and the risk that the U.S. economy
is facing, expectations for tapering in October seem less strong than
before,' said Barnabas Gan, analyst at OCBC Bank.The Fed holds
its next policy meeting on Oct. 29-30, and Gan said if the central bank
decides to stick with its current pace of bond-buying, gold may rise
further towards $1,350. The U.S. monetary stimulus which has
burnished gold's appeal as a hedge against inflation had fueled gold's
rally, pushing it to a record $1,920.30 in September 2011. But
anticipation that the stimulus would be scaled back dragged bullion down
to three-year lows below $1,200 in July, putting it on course for its
first annual decline in 13 years.Gan said he still expects the
Fed to decide to start cutting its stimulus at the December meeting,
with the U.S. economic recovery story likely to continue.The
sustained decline in holdings of exchange-traded funds as well as tepid
physical demand may also limit bullion's gains going forward. Holdings of the largest gold-backed exchange-traded-fund, New York's
SPDR Gold Trust are at the lowest since 2009 and demand from top
consumer India has been curbed by policies aimed at restricting imports
to tame its current account deficit.
