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Gold ends under $1,300; shutdown fails to trigger rally

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Gold settled 3 percent lower on Tuesday, with stop-loss orders helping send the safe-haven metal to its lowest level in almost two months, as investors sold amid frustration that the U.S. government shutdown failed to spark a rally.

The U.S. government partially shut down for the first time in 17 years on Tuesday in a standoff between President Barack Obama and congressional Republicans over healthcare reforms.

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Traders reported market talk about forced liquidation by a distressed commodities fund and selling related to rebalancing by a fund on the first day of the third quarter.

"It's obvious it has to be a fund that is just now forced into liquidation," said Jonathan Jossen, a Comex gold options floor trader. Jossen said selling related to huge bearish bets in December put options might have also pressured gold futures.

Spot gold fell 2.9 percent to $1,288, having hit $1,283.54, lowest since Aug. 8. U.S. gold futures for December delivery settled $40.90 lower at $1,286.10, down 3 percent on the day.

The dollar was also under pressure, while U.S. equities showed some resilience to the government shutdown. Investors fear a prolonged closure could derail the U.S. economy's tentative recovery.

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