By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold hovered near three-month lows on Tuesday as outflows from gold funds continued and as lawmakers made some progress towards resolving the U.S. budget impasse.
Gold, whose safe-haven appeal is usually burnished during times of geopolitical and economic uncertainty, has failed to gain despite protracted wrangling over the fiscal deadlock in the United States.
It has dropped about 4 percent to below $1,300 an ounce since a partial government shutdown began on October 1.
"Based on historical analysis, we think the weeks following a (possible) default would be the time for gold to rally," said Amber MacKinnon, an analyst at Nomura Securities in Sydney.
"Unless we actually see that, gold will be in a holding pattern. The upside is more likely if we get a (credit) downgrade."
During the last fiscal debate over raising the U.S. debt ceiling in 2011 - when a deal was only reached at the last minute - gold did not react sharply until after Standard & Poor's downgraded the U.S. credit rating, MacKinnon said. Prices eventually hit an all-time high of $1,920 in September that year.
"It appears that gold doesn't rally on a safe-haven basis in times of political tensions in the U.S. until after the event has occurred," MacKinnon said.
Spot gold had slipped 0.2 percent to $1,270.70 an ounce by 0641 GMT, after snapping a four-day losing streak in the previous session.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 1.85 tonnes to 889.13 tonnes on Monday to hit fresh four-year lows - reflecting diminishing investor confidence.
A month of combat in the U.S. Congress over government spending showed signs of giving way to a Senate deal to reopen shuttered federal agencies and prevent an economically damaging default on federal debt.
Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, ended a day of constant talks with optimistic proclamations, as details leaked out of the pact they were negotiating.
Source: http://news.yahoo.com/gold-tight-range-amid-us-budget-talks-fund-073229385--finance.html
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