Gold Ends Higher On Fed, Budget Crisis

(RTTNews) - Gold futures ended sharply higher Friday, as the dollar turned lower against a basket of major currencies over concerns of a possible government shutdown in Washington due to its budget and debt ceiling problems. Investors also pondered over the Federal Reserve's next move to scale down its quantitative easing program, after comments attributed a senior Fed official indicate the monetary stimulus program could continue for some more time.

For the week, gold prices gained about 0.5 percent.

According to news reports, Chicago Federal Reserve President Charles Evans speaking to reporters opined that the Fed should continue its $85 billion monthly bond-buying program until 2014, as he feels the U.S. economic environment needs to improve much more.

Meanwhile, investors continued to watch closely the U.S. Government's progress on its budget and debt ceiling issues, which will reach its borrowing limit of $16.7 trillion mid October. The Congress need to raise the debt ceiling by that time, but currently there are not hints of a consensus between the White House and the Republican lawmakers on the horizon.

Gold for December delivery, the most actively traded contract, gained $15.10 or 1.1 percent to close at $1,339.20 an ounce Friday on the Comex division of the New York Mercantile Exchange.

Gold for December delivery scaled an intraday high of $1,345.20 and a low of $1,320.00 an ounce.

Yesterday, gold settled lower as the dollar strengthened against a basket of some major currencies even as investors digested some mixed macroeconomic data out of the U.S. with initial jobless benefit claims declining last week.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at 909.59 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.26 on Friday, down from 80.53 late Thursday in North American trade. The dollar scaled a high of 80.59 intraday and a low of 80.11.

The euro traded higher against the dollar at $1.3525 on Friday, as compared to its previous close of $1.3489 late Thursday in North America. The euro scaled a high of $1.3564 intraday and a low of $1.3476.

In economic news from the U.S., the Commerce Department said personal income rose by 0.4 percent in August following an upwardly revised 0.2 percent increase in July. The acceleration in the pace of growth matched expectations. Additionally, the Commerce Department said personal spending increased by 0.3 percent in August after rising by an upwardly revised 0.2 percent in the previous month. The spending growth also came in line with estimates.

A report by Thomson Reuters and the University of Michigan on Friday showed an upward revision to their reading on U.S. consumer sentiment in September, although the index still indicated a deterioration in sentiment compared the previous month. The final reading on the consumer sentiment index for September came in at 77.5, above the preliminary reading of 76.8 but still below the final August reading of 82.1.

Elsewhere, eurozone economic confidence rose more than expected in September with markedly improved confidence across all business sectors, the European Commission said. The economic sentiment index climbed to 96.9 in September from 95.3 in August. It stayed above consensus of 96. Among components, improvements in construction and retail trade were particularly pronounced.

Germany's EU harmonized inflation remained unchanged in September, in line with economists' expectations, latest data showed. The harmonized index of consumer prices advanced 1.6 percent on annual basis in September, which was unchanged from the growth rate seen in August, preliminary estimates released by the Federal Statistical Office revealed. The outcome matched economists' expectations.

House prices in the UK increased at a faster pace in September, a survey by the Nationwide Building Society showed. The house price index rose 0.9 percent month-on-month in September, faster than a 0.7 percent increase in August. The gain was stronger than the expected 0.5 percent increase.