LONDON: Gold eased on Tuesday as investors cashed in some gains after the previous session's record high, but the political impasse in the United States over raising the debt ceiling kept prices firmly supported above $1,600 an ounce. Spot gold edged down 0.3% to $1,609.79 by 0939 GMT.
It hit a record $1,622.49 on Monday as US President Barack Obama warned that failure to reach an agreement to avert default could cause a deep economic crisis and urged Republican and Democratic leaders to reach a compromise.
"What is different now is the implications it (raising the US debt ceiling) could have on the credit status of the US, Fed policy, potential QE3 and how that affects the dollar so there are tail events here that could be quite problematic," said Michael Lewis, head of commodity research at Deutsche Bank. "Clearly there are substantial tail events to hit the market so the appeal of gold will still be very strong just given the unstable equilibrium that we're in at the moment in terms of debt levels and zero interest rates."
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Bullion has gained nearly 7.4% in July as politicians in Washington clashed over raising the US debt ceiling. US gold was down $2.00 an ounce at $1,610.30. European shares edged lower on concerns over the lack of a debt deal, while the dollar fell to record lows against the Swiss franc and slid 0.6% versus the euro as political wrangling in Washington kept investors on edge.
"Overall, we think the environment should remain favourable and positive technical momentum is likely to see gold test new highs in the nearterm . The next technical resistance is at $1,630/34," Credit Suisse analysts wrote in a note.
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