NEW YORK/LONDON (Reuters) - Gold rose nearly 1 percent on Monday as the ongoing U.S. government shutdown and no signs politicians were willing to resolve a budget impasse and raise the debt-ceiling limit boosted the metal’s safe-haven appeal.
The White House on Monday reiterated that President Barack Obama would not negotiate with Republicans over the threat of a debt default, as stock prices fell and the federal government shutdown neared its second week. Other safe-haven markets, such as U.S. Treasuries, were higher.
Even though reactions to the deadlock in Washington from gold and other financial markets have so far been mild, analysts said that bullion should benefit from the uncertainty related to a possible U.S. default if Congress fails to raise the U.S. debt limit by October 17.
“The longer the shutdown, the longer the issue of debt ceiling crisis, gold will likely be increasingly supported,” said Carlos Sanchez, director of commodities and asset management at CPM Group.
During the last debate over the U.S. debt ceiling, in 2011, gold hit an all-time high of $1,920 an ounce. Congress reached an agreement only at the last minute.
Spot gold was up 0.8 percent at $1,321.01 an ounce by 2:55 p.m. EDT (1855 GMT), having earlier reached its highest since October 1 at $1,327.94.
U.S. gold futures for December settled up $15.20 an ounce at $1,325.10.
Despite Monday’s rally, preliminary Reuters data showed Comex gold futures trading volume at less than 95,000 lots, about 40 percent below its 30-day average.
Traders said that recent weak futures turnover underscored a lack of commitment among bullion investors in spite of the uncertainty.
After gold prices fell last week due to several large sell orders, the precious metal rally resumed, driven by U.S. political uncertainty, analysts said.
“There is flight-to-safety buying all the way across from bonds to currencies to metals,” said Bill O‘Neill, partner of commodities investment firm LOGIC Advisors.
Other financial markets largely reflected investor jitters over the U.S. debt ceiling, with the S&P 500 equities index .SPX down about 0.5 percent, while U.S. Treasury bond prices rose and the dollar index fell. .N
In other precious metals, silver was up 2.9 percent at $22.28, having earlier hit a two-week high at $22.44.
Platinum gained 1.2 percent to $1,396.49 an ounce after a 1.3 percent increase on Friday, as mine strikes and curbs in top platinum producer South Africa threatened to hurt supply.
Palladium rose 0.4 percent to $699.47 an ounce.
US Gold DEC 1325.10 15.20 1.2 1307.90 1329.50 89,929
US Silver DEC 22.386 0.634 2.9 21.650 22.495 29,434
US Plat JAN 1401.90 13.90 1.0 1384.20 1404.60 6,660
US Pall DEC 705.35 3.40 0.5 695.60 706.00 2,975
Gold 1321.01 10.40 0.8 1309.08 1327.94
Silver 22.280 0.630 2.9 21.660 22.440
Platinum 1396.49 15.89 1.2 1385.00 1399.74
Palladium 699.47 2.47 0.4 698.02 702.97
US Gold 93,302 165,070 189,589 23.7 -0.37
US Silver 31,402 57,802 57,455 33.28 -0.14
US Platinum 7,404 14,990 13,010 20.42 0.00
US Palladium 3,031 5,846 5,788
Additional reporting by A. Ananthalakshmi in; Singapore; Editing by Keiron Henderson, Dale Hudson, Nick Zieminski and Jim Marshall