Gold Plunges To Near 2-Month Low, Ends Below $1,300

(RTTNews) - Gold futures plummeted over three percent to end at a near two-month low Tuesday, on a sell-off fury as investors kept a close watch on the implications of the partial shutdown of the U.S. government. The dollar weakened against a basket of major currencies following the shutdown that came after the Congress and the Senate failed to arrive at any agreement on the budget and debt.

The U.S. government was forced into a partial shutdown at midnight on Monday, after Republicans and Democrats were unable to reach an agreement on a new spending bill. The root contention was President Barack Obama's Affordable Care Act, which Democrats say will provide health insurance at reasonable rates but Republicans say is unconstitutional and will hurt business.

The Republican-controlled House passed a bill that would have kept the government running but delayed the implementation of Obamacare. However, the Democratic controlled Senate rejected the legislation, resulting in the first government shutdown in seventeen years.

Gold for December delivery, the most actively traded contract, dropped $40.90 or 3.1 percent to close at $1,286.10 an ounce Monday on the Comex division of the New York Mercantile Exchange.

Gold for December delivery scaled an intraday high of $1,337.80 and a low of $1,282.40 an ounce.

Yesterday, gold settled lower as investors remained cautious amid fears of a possible U.S. government shutdown with the dollar weakening against a basket of major currencies. Investors weighed the looming shutdown and its impact on the demand for the precious metal.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at 905.99 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.17 on Tuesday, down from 80.23 late Monday in North American trade. The dollar scaled a high of 80.32 intraday and a low of 79.86.

The euro traded higher against the dollar at $1.3536 on Tuesday, as compared to its previous close of $1.3526 late Monday in North America. The euro scaled a high of $1.3588 intraday and a low of $1.3518.

In economic news from the U.S., the Institute for Supply Management said its purchasing managers index edged up to 56.2 in September from 55.7 in August, with a reading above 50 indicating growth in the manufacturing sector. Economists had been expecting the index to dip to 55.0.

From the eurozone, Germany's unemployment rate rose to seasonally adjusted 6.9 percent in September from 6.8 percent in August, a Federal Labor Agency report showed. The rate was expected to remain unchanged at 6.8 percent. At the same time, the number of unemployed people increased sharply by 25,000, while it was forecast to drop by 5,000. In August, unemployment rose by 9,000.

Eurozone manufacturing sector expanded at a slower pace in September, final results of a survey by Markit Economics confirmed. The headline purchasing managers' index edged down to 51.1 in September from August's 26-month high of 51.4. The outcome matched the flash estimate released last month.

Meanwhile, the eurozone jobless rate remained unchanged at seasonally adjusted 12 percent in August, Eurostat reported. Economists had forecast the unemployment rate to stay at July's originally estimated 12.1 percent.