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Bullion settles up as US shutdown heads toward grand finale

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Gold settled higher on Wednesday as it appeared U.S. lawmakers would strike a last-minute deal to prevent the country from defaulting on its debt.

U.S. Senate negotiations on legislation to raise the country's $16.7 trillion borrowing limit and reopen government agencies are nearing completion, a senior Senate Democratic aide said.

Spot gold was last flat at $1,281 an ounce. It plunged to its lowest since July 10 at $1,251.66 on Tuesday before rebounding. Analysts see technical support around July lows, between $1,235 and $1,240.

for December delivery settled $9.10 higher at $1,282.30 an ounce.

"We have heard a couple of times that they were close to reach an agreement but they haven't... nonetheless, investors have been generally positive on a solution happening that gold prices have come under pressure anyway," Natixis analyst Bernard Dahdah said.

Chart: Precious Metals

Gold has fallen about 4 percent since the government shutdown began on Oct. 1, disappointing investors who had hoped that uncertainty over the U.S. economic situation could spur safe-haven bids.

Instead, prices have been hurt by large sell orders, amplified by technical selling, over the period.

The last time that high tension emerged over talks to lift the U.S. debt ceiling in 2011, gold hit record highs. This year, sentiment towards bullion is much less positive.

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