Gold gains as Washington fiscal woes bruise dollar

Investing.com - Gold prices shot up on Friday after investors avoided the dollar out of fears that a budgetary impasse in the U.S. Congress may lead to a partial government shutdown in October.

Gold and the dollar tend to trade inversely with one another.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,339.30 during U.S. afternoon hours, up 1.15%.

Gold prices hit a session low of USD1,320.60 a troy ounce and high of USD1,344.40 a troy ounce.

Gold futures were likely to find support at USD1,306.20 a troy ounce, Tuesday's low, and resistance at USD1,375.10, the high from Sept. 19.

The December contract settled down 0.91% at USD1,324.10 a troy ounce on Thursday.

Congress must approve a spending package by Oct. 1 to avoid a partial government shutdown.

While markets are expecting a last-minute deal, uncertainty steered investors away from the U.S. currency on Friday, which sent gold gaining.

The Senate was due to vote on a stop-gap spending bill that was stripped of language defunding President Barack Obama's healthcare reform law, though the bill will go back to the House of Representatives, which called for defunding the president's law in the first place.

Hit-or-miss data and monetary uncertainty in the U.S. bolstered the yellow metal as well.

The Thomson Reuters/University of Michigan consumer sentiment index fell to 77.5 in September from a reading of 76.8 the previous month.

Analysts were expecting the index to rise to 78.0 this month.

Separately, official data showed that U.S. personal spending rose 0.3% in August, in line with expectations, after an upwardly revised 0.2% increase the previous month.

Data also showed that personal income in the U.S. rose 0.4% last month as expected after an upwardly revised 0.2% gain in July, also in line with expectations.

Core personal consumption expenditures, which exclude food and energy, rose 0.2% in August, more than the expected 0.1% gain after a 0.1% increase in July.

The mixed data continued to cloud market expectations as to when the Federal Reserve will begin taper its USD85 billion monthly bond-buying program, which weakens the dollar by driving down interest rates to spur recovery, sending gold rising in the process.

While market consensus remains for the Fed to begin tapering the program this year, most agree the U.S. central bank will take its time dismantling the program, while monetary tightening is nowhere on the horizon.

Elsewhere on the Comex, silver for December delivery was up 0.26% at USD21.822 a troy ounce, while copper for December delivery was up 0.60% and trading at USD3.327 a pound.