Gold ends 1% higher as US impasse ignites safe-haven bids

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Gold settled 1 percent higher on Monday, as a lack of progress among U.S. lawmakers to resolve a government shutdown and raise the U.S. debt ceiling weighed on the equities market, bolstering bullion's safe-haven appeal.

Even though responses from gold and other financial markets have so far been mild to the deadlock in Washington, analysts said that bullion should benefit from the huge uncertainty related to a possible U.S. default if Congress fails to raise the U.S. debt limit by Oct. 17.

Investors holding gold as debt ceiling looms: Pro
Investors holding gold as debt ceiling looms: Pro

Spot gold rose as much as 1.3 percent to its highest since Oct. 1 at $1,327.94 and was last trading at $1,321 an ounce, up 0.8 percent on the day, while U.S. gold futures for December delivery settled 1.2 percent higher at $1,325.10 an ounce.

The U.S. deadlock pushed European equities to a four-month low and the dollar close to an eight-month low against a basket of major currencies.

Chart: Precious Metals

A weaker dollar makes it easier for holders of other currencies to buy dollar-denominated commodities such as gold.

Despite Monday's rally, preliminary Reuters data showed Comex gold futures trading volume was on track to finish below its 30-day average, underscoring a lack of commitment among bullion investors, traders said.

—By Reuters

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