Gold falls more than two per cent GOLD futures have slumped to a three-month low as the belief that US political leaders would reach a compromise to raise the country's borrowing limit reduced demand for a rainy-day asset. The most actively traded contract, for December delivery, on Friday fell 2.2 per cent, or $US28.70, to settle at $US1,268.20 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest price since July 10. The Obama administration and House Republicans continued to negotiate on Friday on a deal to extend the nation's borrowing authority and reopen the federal government after the two-week shutdown. The US borrowing limit is expected to arrive next week, risking a default if a deal to raise the limit is not reached. Some investors buy gold as a hedge against political or economic turmoil, and relative calm in financial markets even as the US government shutdown pushed gold futures on Friday to fourth consecutive loss. "The markets are pricing in that the end of the world is not here," said Jason Rotman, president of Lido Isle Advisors, a commodities investment management firm in Newport Beach, California. In gold, "we've seen a lot of selling and I think it's going to continue." Exchange operator CME Group Inc (CME) briefly halted gold trading as prices slumped in heavy volume on Friday morning, a spokesman said. Stop Logic, a type of circuit breaker that pauses trading for between five and 20 seconds in an attempt to prevent excessive volatility, was triggered in the December-delivery gold futures contract at 8.42am EDT (2342 AEDT) and lasted for 10 seconds, the spokesman said. Futures fell by $US14.50 an ounce in that minute. Bigger picture, "there's a huge disappointment with gold's inability to rally or sustain a rally off the backdrop of the debt ceiling" debacle, said Graham Leighton, director of precious metals trading with brokerage Marex Spectron. Gold is down 24 per cent this year largely as investors anticipate an end to the Federal Reserve's stimulus, as well as rising higher interest rates. Rising rates make zero-yielding assets like gold less appealing, analysts say. Under that pressure, gold's moments of strength this year on the US debt ceiling, slowing growth, and escalating crisis in Syria, have proved fleeting. London PM Gold Fix: $1,298.50; previous PM $1,265.50 Dec gold $1,268.20, down $28.70; Range $1,259.60-$1,294.80 Dec silver $21.259, down 63.7 cents; Range $20.950-$21.860 Jan platinum $1,375.60, down $20.40; Range $1,362.50-$1,391.70 Dec palladium $713.30, up $7.50; Range $707.10-$716.95