Gold Drops as Last-Minute Deal Is Seen Ending U.S. Debt Wrangle

Gold fell on expectations that U.S. lawmakers will still manage to agree to lift the debt ceiling before the government’s borrowing authority lapses tomorrow even after the House of Representatives scrapped a vote on a plan.

Bullion for immediate delivery lost as much as 0.6 percent to $1,275 an ounce and was at $1,275.06 at 8:03 a.m. in Singapore. Prices dropped to $1,251.85 yesterday, the lowest level since July 10, before closing 0.8 percent higher as the negotiations stalled. Gold for December traded 0.2 percent higher at $1,276 an ounce on the Comex in New York.

After the House vote was scrapped, Senate Majority Leader Harry Reid, a Democrat, and Minority Leader Mitch McConnell, a Republican, resumed talks to end the impasse. Fitch Ratings put the U.S. on watch for a possible credit downgrade yesterday, citing lawmakers’ inability to forge a deal while reiterating that it expects the debt ceiling to be raised.

The House scrapped the vote last night on a fiscal plan, according to Representative Pete Sessions, chairman of the House Rules Committee. That bill would have kept the government open through Dec. 15 and suspended the debt limit until Feb. 7, 2014.

(Source: Bloomberg)