Gold slides to 3-month low as silver declines on US optimism

LONDON: Gold today dropped to a three- month low on optimism Senate leaders will forge a deal to reopen the US government and avoid a breach of the debt limit.

Gold fell 1.2 per cent to USD 1,257.60 an ounce. Prices reached USD 1,253.78, the lowest since July 10. Silver also fell 2.4 per cent to 20.76 dollar an ounce, declining for a sixth day in the worst run since April.

Senate Majority Leader Harry Reid said he hoped a deal could be announced today. The emerging deal would stave off a potential default, end the 15-day-old government shutdown and change the immediate deadlines in favour of three new ones over the next four months. Without an agreement, US borrowing authority lapses on October 17.

Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on speculation the Federal Reserve will slow debt purchases.

Holdings in gold-backed exchange-traded products are at a three-year low and economists surveyed said the US central bank will start slowing bond-buying in December.