(For more on the gold bear market, see EXT5.)
Oct. 10 (Bloomberg) -- Gold futures fell to a one-week low on speculation that the U.S. will avert a default, eroding demand for the precious metal as a haven.
The Obama administration endorsed a short debt-limit increase with no policy conditions attached, signaling potential support for a proposal by House Republicans for a monthlong reprieve from a default. Most Federal Reserve policy makers said the central bank probably will taper bond purchases this year, according to minutes released yesterday of their September meeting.
“The market is speculating that there will be some kind of an agreement between the two political parties soon,” David Lee, a vice president at Heraeus Precious Metals Management in New York, said in a telephone interview. “Also, worries about tapering will continue to work against gold.”
Gold futures for December delivery fell 0.8 percent to settle at $1,296.90 an ounce at 1:41 p.m. on the Comex in New York. Earlier, the price touched $1,293.40, the lowest for a most-active contract since Oct. 2. The metal has dropped 23 percent this year.
“We recommend staying away from gold at this point in the cycle,” Morgan Stanley analyst Joel Crane said in a video report. Tapering is “postponed, not canceled, and is expected by year-end,” bank analysts said in an Oct. 7 report. They said that the political stalemate in Washington will be broken before the debt ceiling is breached.
Earlier, gold rose as much as 0.4 percent after a report showed more Americans than projected filed applications for unemployment benefits last week, partly because the federal shutdown forced some government contractors to pare staff.
Silver futures for December delivery climbed less than 0.1 percent to $21.896 an ounce. The price has dropped 28 percent this year.
On the New York Mercantile Exchange, platinum futures for January delivery advanced 0.9 percent to $1,396 an ounce.
Palladium futures for December delivery rose 1.2 percent to $712.55 an ounce.
--With assistance from Glenys Sim in Singapore. Editors: Patrick McKiernan, Thomas Galatola