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Gold rises on news of possible U.S. downgrade

Staff Reporter | 9:40 PM |
Investing.com - Gold futures traded higher during Wednesday’s Asian session on news one of the major credit ratings agencies is mulling a downgrade of the U.S. sovereign debt rating. 

On the New York Mercantile Exchange, gold futures for December delivery rose 0.23% to USD1,276.10 per troy ounce in Asian trading Wednesday. The December contract settled lower by 0.27% at USD1,273.20 per ounce on Tuesday. 

Gold futures were likely to find support at USD1,215.55 a troy ounce, the low from July 8, and resistance at USD1,289.70, Monday's high.

Gold came under some pressure as optimism grew that U.S. policymakers were inching closer to an agreement that would reopen the government and allow politicians to get back to work in an effort to raise the debt ceiling. 

That optimism was short-lived, however, as media reports broke late in Tuesday’s U.S. session that said talks between Senate Majority Leader Harry Reid (D-NV) and his counterpart, Republican Mitch McConnell (R-KY) had broke down. 

Making matters worse were conflicting reports. Some reported that the talks were ongoing while others said the opposite. 

Fitch Ratings, the only of one of the three major credit ratings agencies that still has an AAA rating on the U.S., put U.S. Treasury bonds on Rating Watch Negative. That could be viewed as a sign Fitch is preparing to pare its rating on U.S. sovereign debt. 

"The prolonged negotiations over raising the debt ceiling ... risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S. This `faith' is a key reason why the U.S. 'AAA' rating can tolerate a substantially higher level of public debt than other AAA" bonds," said Fitch in a statement. 

Elsewhere, Comex silver for December delivery rose 0.20% to USD21.233 per ounce while copper for December delivery fell 0.10% to USD3.303 an ounce.