Gold Declines as President Says U.S. Lawmakers Reach Deal on Debt Ceiling

Aug. 1 - Gold dropped from a record as President Barack Obama said that U.S. lawmakers reached a deal to increase the nation’s debt limit and cut the federal deficit, averting a default tomorrow and eroding demand for haven assets.

Gold for immediate delivery lost as much as 1.3 percent to $1,607.45 an ounce, and traded at $1,613.35 at 9:45 a.m. in Singapore. Spot gold, which reached an all-time high of $1,632.80 on July 29, advanced 8.5 percent last month on concern that sovereign-debt crises in the U.S. and Europe may derail the global economic recovery.

“Gold reached a record because U.S. politicians didn’t seem to be getting anywhere with their negotiations and now that they have an agreement, gold will be knocked back a little,” said Steven Zhu, operations manager at Yinjian Futures Co.

Republicans and Democrats may vote today on the measure, which would raise the $14.3 trillion debt ceiling through 2012, cut spending by about $1 trillion and call for enactment of a law shaving a further $1.5 trillion from long-term debt by 2021. Lawmakers should “do the right thing,” Obama said from the White House late on July 31 in Washington.

“We all knew the U.S. politicians would reach a deal by Aug. 2,” Zhu said from Shanghai. “However, problems still exist within the economies of the U.S. and Europe and that will keep gold’s uptrend intact.”

Gold for December delivery in New York shed as much as 1.4 percent to $1,608.20 after rallying to an all-time high of $1,637.50 on July 29. Exchange-traded product holdings climbed for a fifth day on July 29, reaching a record 2,152.222 metric tons, Bloomberg data show.

Cash silver fell as much as 1.2 percent to $39.41 an ounce. Spot platinum gained 0.9 percent to $1,796.13 an ounce, while palladium rose 0.6 percent to $836 an ounce.