By: Reuters and CNBC
Top Republicans and Democrats worked behind the scenes on Wednesday on a compromise to avert a crippling U.S. default, looking to salvage a last-minute deal from rival debt plans that have little chance of winning broad congressional approval on their own.
With the August 2 deadline just days away, the United States is in increasing danger of losing its top-notch credit rating, even if a deal to avert default is reached, analysts and traders said.
"It looks like a downgrade has been priced in with all the sell-off in the dollar," said a Singapore-based trader. "Gold remains a good trade overall with some people targeting $1,650s or $1,660s."
The dollar [.DXY 74.11
0.03 (+0.04%) 
] remained on the defensive as Washington showed no signs of progress in debt agreement, making dollar-priced gold more appealing to holders of other currencies.
Spot gold [XAU 212.35
-6.49 (-2.97%) ] edged up 0.1 percent to $1,614.86 an ounce by 0219 GMT, off an all-time high of $1,628 set on Wednesday.
U.S. gold [GCCV1 1615.20 0.10 (+0.01%) ] was flat at $1,615.50.
Adding to the safe haven demand, Standard & Poor's cut Greece's sovereign credit rating further into junk territory, saying the European Union's proposed debt restructuring would put the country into "selective default".
Technical analysis suggested that a bullish goal at $1,644 has been abandoned and gold could head down towards $1,593, said Reuters analyst Wang Tao.
If Washington reaches a deal on raising the $14.3 trillion debt ceiling, gold could face a pullback with the return of risk appetite.
Spot gold took a breather on Thursday after hitting record highs for two sessions this week, as sentiment remained supported by the deadlocked U.S. debt ceiling talks, with both parties trying to reach a compromise.
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Diamond Sky Images | Photodisc | Getty Images |
With the August 2 deadline just days away, the United States is in increasing danger of losing its top-notch credit rating, even if a deal to avert default is reached, analysts and traders said.
"It looks like a downgrade has been priced in with all the sell-off in the dollar," said a Singapore-based trader. "Gold remains a good trade overall with some people targeting $1,650s or $1,660s."
The dollar [.DXY 74.11
0.03 (+0.04%) ] remained on the defensive as Washington showed no signs of progress in debt agreement, making dollar-priced gold more appealing to holders of other currencies.Spot gold [XAU 212.35
-6.49 (-2.97%) ] edged up 0.1 percent to $1,614.86 an ounce by 0219 GMT, off an all-time high of $1,628 set on Wednesday. U.S. gold [GCCV1 1615.20
0.10 (+0.01%) ] was flat at $1,615.50. Adding to the safe haven demand, Standard & Poor's cut Greece's sovereign credit rating further into junk territory, saying the European Union's proposed debt restructuring would put the country into "selective default".
Technical analysis suggested that a bullish goal at $1,644 has been abandoned and gold could head down towards $1,593, said Reuters analyst Wang Tao.
If Washington reaches a deal on raising the $14.3 trillion debt ceiling, gold could face a pullback with the return of risk appetite.
"Gold is very ignitable at this point — throw it a spark and it shoots up," said Hou Xinqiang, an analyst at Jinrui Futures in China.
"When we see a result, prices will correct and present a good chance to get into the market."
In Asia's physical gold market, record highs have triggered moderate selling and buying remained muted during the seasonal lull.
Spot silver [XAG= 40.35 0.15 (+0.37%) ] gained half a percent to $40.38, after reaching $41.42, its highest since early May, when prices tumbled from a record of $49.51 set on April 28.
"When we see a result, prices will correct and present a good chance to get into the market."
In Asia's physical gold market, record highs have triggered moderate selling and buying remained muted during the seasonal lull.
Spot silver [XAG= 40.35
0.15 (+0.37%) ] gained half a percent to $40.38, after reaching $41.42, its highest since early May, when prices tumbled from a record of $49.51 set on April 28.Copyright 2011 Thomson Reuters. Click for restrictions.
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