Gold futures edge lower with U.S. fiscal woes, stimulus in focus

Investing.com - Gold futures edged lower during European morning hours on Thursday, giving back some of the previous session’s 2.7% gain, as a U.S. government shutdown entered its third day.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,313.40 a troy ounce, down 0.55%.

Prices traded in range between USD1,309.50 a troy ounce, the daily low and a session high of USD1,317.00 a troy ounce.

The December contract ended 2.69% higher on Wednesday to settle at USD1,320.70 a troy ounce.

Gold futures were likely to find short-term support at USD1,278.20 a troy ounce, Wednesday’s low and the weakest level since August 7 and resistance at USD1,337.80, the high from October 1.

Prices surged on Wednesday as the U.S. dollar weakened amid fears that the government shutdown in the U.S. would curb the economic recovery and prompt the Federal Reserve to maintain its stimulus program for longer.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, fell to a nine-month low 79.84 before climbing back to trade at 80.00.

Investors continued to weigh the implications of a protracted U.S. government shutdown.

President Barack Obama met with Republican and Democratic leaders in Congress on Wednesday, although a solution still seemed unlikely.

Markets were also considering how the political deadlock in Washington will impact negotiations to raise the U.S. debt ceiling, which the U.S. Treasury Department has estimated will be reached by October 17.

Moody's Investors Service warned that a failure to raise the debt limit would result in a worse outcome for financial markets than a government shutdown.

A partial shutdown of U.S. federal government operations was expected to delay Friday's highly-anticipated non-farm payrolls report for September.

On Wednesday, payroll processing firm ADP said non-farm private employment rose by a seasonally adjusted 166,000 in September, below expectations for an increase of 180,000.

The previous month’s figure was revised down to a gain of 159,000 from a previously reported increase of 176,000.

Gold traders have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

Last month the U.S. central bank took markets by surprise with a decision to keep its stimulus program on track, saying it wanted to see more evidence of a sustained economic recovery before tapering.

Elsewhere on the Comex, silver for December delivery fell 0.85% to trade at USD21.71 a troy ounce, while copper for December delivery added 0.2% to trade at USD3.323 a pound.