Gold settled lower on Tuesday, as faint glimmers of hope in the U.S. fiscal standoff were not enough to dissipate fears the country could still be pushed toward an unprecedented default.
On Monday, a White House spokesman said it would accept a short-term increase in the nation's borrowing authority to avoid default. An influential senator was also said to be floating a plan to cut federal spending and reform the U.S. tax code as part of a broader deal.
The budget impasse that has shut down parts of the U.S. government entered its second week and still looked set to continue.
"There is a realization that as difficult and serious as this budgetary situation in the United States is, eventually a solution will be found and the country won't default,'' Mitsubishi analyst Jonathan Butler said.
During the last debate over the U.S. debt ceiling in 2011, gold hit an all-time high of $1,920 an ounce. Congress reached an agreement only at the last minute.
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