Gold Little Changed; Awaits U.S. Representatives Vote on Bill

By Feiwen Rong

Oct. 2 (Bloomberg) -- Gold was little changed after the U.S. Senate approved a revised $700 billion financial-rescue package designed to arrest a credit crisis and unlock lending, sending the bill to the House of Representatives for a vote.

The modified package, which includes tax breaks for home owners, was just approved by the Senate and goes to the House of Representatives for a vote on Oct. 3. Gold has jumped 14 percent since Sept. 12 as credit losses forced the U.S. to pursue the biggest market intervention since the Great Depression and led investors to buy safe-haven assets.

``There remains a lot of uncertainty pending a final decision from the House of Representatives,'' John Wixley, head of global markets in Asia at Standard Bank Group Ltd., said today from Hong Kong.

Gold for immediate delivery was little changed at $873.80 an ounce at 11:06 a.m. in Singapore. Silver for immediate delivery was down 1.1 percent at $12.4175 an ounce.

The first rescue package was rejected by the House of Representatives on Sept. 29, triggering a global financial markets rout and boosting gold.

``In the short-term, gold is continuing to trade in a $50 range with profit taking above $900 and buying between $860 and $870,'' Wixley said. ``Relative to other commodities such as base metals, gold remains one of the better performers.''

Dollar's Gain

The dollar's gain against the euro may exert pressure on bullion as investors usually buy gold as an alternative asset when the dollar is weak, Wixley said.

The dollar climbed for the fourth day against the euro, rising to $1.3966 at 10:38 a.m. in Singapore from $1.4009 late yesterday in New York. It touched $1.3882 on Sept. 11, the strongest in a year.

``Our base-case scenario continues to be that the dollar should strengthen against a weak euro and this will make gold's attempt at new highs, in dollar terms, more difficult,'' Wixley said. ``As de-leveraging continues and liquidity remains a problem even gold will not be immune from long position liquidation as cash is needed elsewhere.''

Still, bullion may be helped by decreased sales from European central banks and investor demand in gold exchange- traded funds, Wallace Ng, precious metals trader at Fortis Bank, said by phone from Hong Kong.

European Sales

European central banks' gold sales are estimated at 357.2 metric tons in the year ending September, below the self-imposed 500-ton annual quota, Anne-Laure Tremblay, an analyst at BNP Paribas SA in London, said in a report yesterday, citing World Gold Council estimates.

Gold holdings in the world's largest exchange-traded fund backed by bullion, the SPDR Gold Trust, continued to advance, reaching a record 755.26 tons as of Sept. 30.

``Gold may also benefit if the U.S. cuts interest rate as I think they will, as part of the overall package to revive the economy,'' Fortis Bank's Ng said.

The probability that the Federal Reserve may cut interest rates by 50 basis points before policy makers are next scheduled to meet increased after a report yesterday showed manufacturing in the U.S. contracted at the fastest pace since the last recession.

December-delivery gold fell 1 percent to $878.70 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 10:49 a.m. in Singapore.

Gold for August delivery fell 0.9 percent to 2,970 yen a gram ($872) an ounce on the Tokyo Commodity Exchange at the 11:00 a.m. local time break.

To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net