Gold Prices Slip as Debt Ceiling Extended (Update 1)

Updated from 11:35 a.m. EST with settlement prices

NEW YORK ( TheStreet) -- Gold prices ticked lower on Wednesday as the House voted to suspend the debt ceiling for four months.

Gold for February delivery lost $6.50 to settle at $1,686.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,694.80 and as low as $1,683.10 an ounce, while the spot price was slipping $6.10, according to Kitco's gold index.

The House voted Wednesday to temporarily suspend the debt ceiling and Senate Democratic leadership emerged to offer their support of the vote. Republicans made the decision to push the debt debate to a later date, and Democrats followed President Barack Obama's lead as his office released a statement late Tuesday that it was encouraged by a short-term solution.

" T he Administration is encouraged that H.R. 325 lifts the immediate threat of default," an administration statement on policy said. " T he Administration would not oppose a short-term solution to the debt limit and looks forward to continuing to work with both the House and the Senate to increase certainty and stability for the economy."

Avoiding a debt limit clash will delay fears of a repeat of the summer 2011 encounter that led to a protracted disagreement to raise the ceiling, which led to Standard & Poor's downgrade of the government's credit rating.

Gold stood to benefit from the uncertainty of a debt limit disagreement, but the delay has led prices lower for Wednesday.

The gold price during the trading session didn't slump significantly, though, because another major vote by Congress is quickly approaching to settle the sequester -- across the board spending cuts to the budget -- and an official budget vote for the fiscal year.

Silver prices for March delivery added 26 cents to close at $32.44 an ounce, while the U.S. dollar index was up 0.10% to $79.95.

Gold has been stuck in a tight trading range with few economic events or announcements to push it decidedly in one direction.

"We seem to be moving away from that crisis mentality," said Stanley Dash, vice president of applied technology analysis at TradeStation Securities. "Gold hasn't moved in weeks."

Dash said technicals showed a return to a negative correlation in 2012 between gold and the U.S. dollar, and said that gold could sink fast if it dips below $1,645 an ounce anytime soon.

The Bank of Canada announced Wednesday that it would make no changes to key interest rates, and reported that it didn't believe the country's economy would reach full capacity until the second half of 2014. Gold investors may have been watching for any signs of inflation in the Canadian economy. The central bank said it expected inflation to trough at 0.9% in the first quarter of 2013, but move up to 2% by the third quarter of 2014.

The Bank of England's Monetary Policy Committee printed minutes of its January meeting, which showed consensus to keep rates low, but disagreement about the effectiveness of continued asset purchases.

The Federal Reserve expressed similar disagreement as to the effectiveness of its quantitative easing programs on the economy, but central bankers generally still believe the near-term benefits of monetary stimulus are necessary.

Gold mining stocks were mostly lower on Wednesday. Shares of Kinross Gold ( KGC) were losing 2.4%, and shares of NovaGold Resources ( GFI) were off 2.5%

Among volume leaders, Barrick Gold ( ABX) and Newmont Mining ( NEM) were slipping 1.2%

Gold ETFs were trading at high volumes as SPDR Gold Trust ( GLD) was decreasing 0.31%, and iShares Gold Trust ( IAU) was sliding 0.33%.

-- Written by Joe Deaux in New York.

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