Gold was trading near one-week highs on Friday and headed for its best weekly gain in two months on hopes that uncertainties in Washington would delay Federal Reserve stimulus tapering after U.S. lawmakers reached only a temporary budget deal. U.S. Congress reached a last-minute agreement this week to increase its borrowing capacity till early next year, averting a historical debt default, and end a 16-day long shutdown. Gold fell about 4 percent during the U.S. government shutdown, but jumped 3 percent on Thursday after the dollar dropped to eight-month lows and a Chinese rating agency downgraded the U.S. sovereign rating.
“It is largely due to expectations in the market, when gold prices were dropping for a few days, that the downside was limited,” said Songwut Apirakkhit, managing director of Globlex Holding Management in Bangkok. “Even though it was a second-tier rating agency like Dagong, gold gained as the dollar (was) sold off.” Prices were also supported on Thursday by two separate bursts of unusually heavy buy orders that lifted prices by $40 in minutes. This marks the fifth time in less than two weeks the benchmark U.S. Comex gold futures contract for December delivery posted sudden, often unexplained, intraday sharp price swings.
Spot gold largely held previous session’s gains on Friday, easing 0.1 percent to $1,317.64 an ounce by 0327 GMT and recording a 3.5 percent gain for the week. Apirakkhit said gold could stay at these levels and possibly push higher as the timeline for the U.S. Federal Reserve tapering has been pushed out and the United States still has not resolved its budget issues. “The keyword here is temporary,” said Apirakkhit, referring to the U.S. debt deal. “Since it is not finalised yet, gold can still see some support.” The Federal Reserve will likely defer any decision to trim its massive bond buys until at least December, two top Fed officials suggested.
Economists said the tapering could be delayed until early 2014 as the U.S. recovers from the impact of the government shutdown. Gold’s gains supported other precious metals, with silver and platinum headed for their best weekly performance in months.
Precious metals prices 0327 GMT

 COMEX gold and silver contracts show the most active months

Source: Reuters
Source:Bullion Bulletin