Gold Prices Stay Firm in Wait for U.S. Representatives Vote on Bill

Gold prices changed little upon news of the U.S. approval of the revised $700 billion bail out package designed to truncate the credit crisis and to reignite lending and capital flow.

While gold prices held stable, oil prices fell as U.S. Government data released yesterday indicated that demand for oil in the U.S. has slumped substantially.

The modified bail out plan, which now includes tax breaks for homeowners, has just been approved by the Senate and goes to the House of Representatives for a vote on October the 3rd.  Gold has surged 14 percent since September the 12th as credit loses forced the U.S. to pursue the biggest intervention in the markets since the Great Depression, which has resulted in many wealth investors seeking safe haven investments.

John Wixley, head of global markets in Asia at Standard Bank Group Ltd., said: “in the short-term, gold is continuing to trade within a $50 range with profit taking above $900 and buying between $860 and $870.”  He also remarked: “relative to other commodities such as base metals, gold remains one of the better performers.”

Gold prices rose 2.3 per cent to $890 a troy ounce in late London trading, moving within a range between a low of $870.40 and a high of $891.40.

Gold’s gain against the dollar may slow a little as the dollar gains strength against a now weakening euro; 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 September the 11th, the strongest level in a year.  Bullion prices however, are expected to remain strong with decreased sales from European central banks coupled with increased demand from private investors for both bullion and gold exchange-traded funds.

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 September the 30th.

An expected imminent decrease in interest rates as more unpalatable economic data is received will also almost certainly have a positive effect on gold prices.