Gold prices sank to a four-month low in early dealings on Thursday, as optimism towards U.S. lawmakers’ making progress on tax legislation continued to grow while fears over a potential government shutdown receded.
Comex gold futures were at $1,260.80 a troy ounce by 3:05AM ET (0805GMT), down $5.50, or about 0.4%, from the last session’s closing price. It touched its lowest level since Aug. 8 at $1,258.10 earlier.
The yellow metal notched a minor gain of 0.1% on Wednesday, as investors continued to track progress made by U.S. lawmakers to pass a bill that will overhaul the American tax system.
The U.S. Senate voted on Wednesday to go to a conference committee with the House to negotiate a plan to reform the tax system, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.
Some investors also believe the boost to the economy will prompt the Federal Reserve to raise interest rates at a faster pace.
Meanwhile, worries over a potential U.S. government shutdown eased after a bill advanced in the House of Representatives late on Wednesday to extend current federal funding through Dec. 22, with the chamber expected to take up the bill on Thursday.
Congress is facing a deadline of Friday at midnight to pass fresh spending legislation. If they cannot agree on the terms, parts of the federal government could shut down.
The dollar firmed as investors digested the developments on Capitol Hill. The dollar index, which tracks the greenback against a basket of major currencies, rose to its highest level in more than two weeks.
Besides politics, investors also looked ahead to key U.S. economic data due later in the session for fresh clues on the likely trajectory of monetary policy in the months ahead.
The highlight of Thursday’s economic calendar will be the weekly jobless claims report at 8:30AM ET (1330GMT).
Investors are also looking ahead to Friday’s nonfarm payrolls report, which would be the last employment report before the Federal Reserve’s monetary policy meeting next week.
The U.S. central bank is widely expected to raise interest rates following its meeting on Dec. 13. However, markets appeared doubtful over the central bank’s ability to raise rates as much as it would like next year due to concern over the sluggish inflation outlook.
In other metals trading, silver futures declined 4.5 cents, or 0.3%, to $15.91 a troy ounce, the lowest since mid-July.
Meanwhile, copper futures held near a more than two-month low touched earlier this week, as concerns over demand in top consumer China continued to weigh.
