London: Gold was little changed on Wednesday, marking time after US lawmakers gave renewed assurances that a deal to avert a US default was within reach.
Officials said late on Tuesday an agreement to lift the government's USD 16.7 trillion borrowing limit was near after two separate legislative efforts in the House were buried by Republican rebellions, fraying market nerves.
Spot gold was unchanged at USD 1,280.70 an ounce by 1154 GMT. It plunged to its lowest since July 10 at USD 1,251.66 on Tuesday before rebounding. Analysts see technical support around July lows, between USD 1,235 and USD 1,240.
US gold futures for December were up USD 6.90 an ounce at USD 1,280.20.
"This week we are seeing gold struggling despite the fact that it is looking quite likely the negotiations over the US debt ceiling will be dragging on for another day or two," Mitsubishi analyst Jonathan Butler said.
"If an agreement isn't reached, we might see a technical default, but there is a view that this won't be a real default, simply that the US have failed to get to an agreement on time, and any potential support to gold would be short-lived," he added.
If Washington does not reach a deal by Thursday, the US government will by law no longer be able to add to the national debt and will have to rely on incoming revenue and about USD 30 billion in cash to meet obligations.
That money is expected to run out quickly, and the government would start missing payments in the weeks ahead. A global financial crisis could follow if investors decided that US debt, used as collateral for trillions of dollars in financial deals, no longer provided adequate security.
Gold has fallen about 4 percent since the government shutdown began on Oct. 1, disappointing investors who had hoped that uncertainty over the US 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 US debt ceiling in 2011, gold hit record highs. This year, sentiment towards bullion is much less positive.
The metal has lost nearly a quarter of its value this year on expectations the Federal Reserve will soon end its stimulus programme, which has kept interest rates low and stoked inflation fears.PHYSICAL BUYING
Demand picked up as gold prices traded near three-month lows. Premiums - the best way to measure demand - rose in Asia.
Gold premiums in India, the world's biggest buyer of the precious metal, hit a record USD 100 an ounce due to a shortage of supplies to meet festival demand.
In China, premiums in the Shanghai Gold Exchange climbed to over USD 20 an ounce from about USD 7 two weeks earlier.
In other precious metals, silver fell 0.2 percent to USD 21.20 an ounce.
Spot platinum was up 0.1 percent at USD 1,387.00 an ounce. Spot palladium gained 0.1 percent to USD 706.50 an ounce.
First Published: Wednesday, October 16, 2013, 18:39