Gold Rises Most in Two Weeks on Stalemate, Taper Bets

Gold had the biggest gain in almost two weeks on speculation that the Federal Reserve will delay reducing fiscal stimulus amid the first U.S. government shutdown in 17 years, stoking demand for the metal as a store of value.

A budget impasse triggered furloughs for 800,000 federal workers as parks and other services were shuttered for a second day, subtracting at least $300 million a day in economic output, according to IHS Inc. (IHS) Companies added fewer workers than forecast in September, the ADP Research Institute said today. On Sept. 18, the Fed unexpectedly refrained from reducing its $85 billion of monthly bond purchases.

“The shutdown will lead to some delays in government spending, which will lead to a postponement in tapering as the Fed wants to see more signs of growth,” Scott Carter, the chief executive officer of Los Angeles-based Lear Capital, said in a telephone interview. “Today’s ADP numbers showed that the employment scenario still remains weak.”

Gold futures for December delivery rose 2.7 percent to settle at $1,320.70 an ounce at 1:38 p.m. on the Comex in New York, the biggest gain for a most-active contract since Sept. 19. Earlier, the price touched $1,276.90, the lowest since Aug. 7.

Debt Debate

Yesterday, the metal dropped 3.1 percent, the most since July, as global equities gained amid speculation the shutdown would be short-lived. The odds probably are increasing that the standoff on a spending plan will be combined with the debate on raising the debt limit later this month.

“We will also see some safe-haven bids for gold because of the debt-ceiling worries,” Carter said.

The U.S. faced an impasse over raising the debt ceiling in 2011 before Congress approved a plan to head off a default. Gold reached a record $1,923.70 on Sept. 6, 2011.

Gold has slumped 21 percent this year, partly on speculation that the Fed will scale back stimulus amid gains in the labor market.

Silver futures for December delivery jumped 3.4 percent to $21.88 an ounce, the biggest gain since Sept. 19. Yesterday, the price touched $20.63, the lowest since Aug. 12.

On the New York Mercantile Exchange, platinum futures for January delivery advanced 0.6 percent to $1,393.40 an ounce.

Palladium futures for December delivery gained 0.3 percent to $721.20 an ounce.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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