Gold rebounds past $1,300 after a rough patch

Gold fluctuated above $1,300 an ounce, heading for its best week in two months, as investors weighed the potential timing of a reduction in stimulus by the U.S. Federal Reserve. Platinum retreated from a one-month high.

Bullion for immediate delivery swung between gains and losses, and traded 0.3 percent lower at $1,316.55 an ounce by 2:25 p.m. in Singapore.

The metal surged 3 percent and reached a one-week high of $1,324.55 Thursday, as the dollar fell on speculation that the Fed won’t start tapering until 2014.

Prices are up 3.5 percent this week in the best showing since the five days to Aug. 16, halting two weeks of losses. The Fed said in its Beige Book survey this week that growth remained “modest to moderate” amid a government shutdown.

The closure ended as U.S. lawmakers reached an agreement that funds the government through Jan. 15, 2014, and suspends the debt limit through Feb. 7.

“What’s happening with the debt deal is postponing all the pain that we’re going to see down the road, and it might hamper the growth momentum,” Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit, said on Bloomberg Television’s “On the Move.” “With the prolonging of the problems in the U.S., tapering’s going to be postponed. Gold is supported but let’s be cautious about calling for a much higher price.”

Gold lost 21 percent this year on expectations the Fed will slow its $85 billion-a-month of bond buying as the economy improves.

BlackRock and Pacific Investment Management said the central bank will postpone tapering as a result of the debt-ceiling debate. Fed policy makers are scheduled to meet Oct. 29-30 after they unexpectedly refrained from reducing stimulus at their last meeting.

The Bloomberg U.S. Dollar Index, little changed today, closed at its lowest level in eight months yesterday and was set for a weekly drop versus its 16 major counterparts.

Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, contracted to 882.23 metric tons Thursday, the least since February 2009.

Gold for December delivery fell 0.5 percent to $1,316 an ounce on the Comex in New York, paring this week’s advance to 3.8 percent, the most since the week to Aug. 16.

Spot silver lost 0.4 percent to $21.795 an ounce, halting three days of gains after reaching $22.1885 Thursday, the highest since Oct. 10. The metal is up 2.1 percent this week, heading for its first weekly increase in three.

Platinum was little changed at $1,437.80 an ounce after earlier touching $1,440.40, the highest since Sept. 20. The metal is set to snap seven weeks of losses, the longest such run since May 2012.

Palladium declined 0.2 percent to $738.85 an ounce. The metal is poised for a second weekly gain, after reaching $741.30 Thursday, the highest level since Aug. 29.

Bloomberg