Gold have rallied as the resolution of the US fiscal stalemate turned trader attention to the likely path of US monetary policy.
The most actively traded contract, for December delivery, on Thursday rose $US40.70, or 3.2 per cent, to settle at $US1,323 a troy ounce on the Comex division of the New York Mercantile Exchange.
This was gold's highest settlement since September 30 and came in the wake of an 11th-hour deal to avert a US sovereign debt default.
Congress late on Wednesday passed a measure to temporarily raise the debt ceiling and reopen the federal government, giving lawmakers more time to negotiate changes to long-term fiscal policy.
But in the wake of a 16-day federal government shutdown, many investors are taking stock of the likely impact Washington's wrangling exerted on the real economy.
"What we've done is some serious damage to fourth-quarter growth," said Bart Melek, senior commodity strategist with TD Securities. With as much as 800,000 people foregoing a pay cheque throughout the shutdown, which likely limited spending, the US economic expansion in the October to December period is likely to be between 0.4 per cent and 0.6 per cent lower.
As a result, many investors are turning their sights to the Federal Reserve. The central bank has said that economic growth is a key consideration for the pace and timing of reducing its $US85 billion-a-month in accommodative bond purchases.
"If the Fed didn't feel comfortable tightening policy or removing accommodation in September, it's even more likely to be reluctant to do so now," Melek said.
To this end, investors are training their sights on the upcoming Federal Open Market Committee Meeting, on October 29 and 30, said Edward Meir, senior commodity strategist with brokerage INTL FCStone.
"The odds are high that the central bank will stand aside once again, if for no other reason than to make sure it doesn't administer yet another needless shock to the system," Meir said.
Gold prices had plunged as much as 28 per cent this year amid fears that the zero-yielding asset would fall out of favour as reductions in the Fed's stimulus efforts prompt interest rates to rise.
Melek said he expects the central bank to delay tapering its monthly bond purchases until March 2014.
Meanwhile, the continuing uncertainty surrounding US fiscal policy, in addition to prolonged stimulus measures, are likely to benefit gold prices, he added.
"If you're an investor, you're likely to hold on to your gold until you have more clarity on the economy," Melek said.