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Gold, silver rise on worries about a US default

Gold and silver prices closed higher Friday as investors bought up hard assets ahead of a possible debt default by the U.S. government next week.

Most other commodities fell. Prices for corn, oil, platinum and gasoline tumbled on worries that weak economic growth in the United States would crimp demand.

Those worries were stoked by Friday's report from the Department of Commerce showing that economy expanded at a meager 1.3 percent annual rate in the spring, much worse than economists expected.

When economic growth slows, so too does demand for raw materials like grain to feed livestock and industrial metals to build automobiles and other durable goods.

The Treasury Department says the government won't have enough money to cover all its bills after Tuesday unless an agreement is in place to raise the country's borrowing limit.

Congress remained deadlocked in its efforts to avoid a default by raising the debt ceiling. If a default occurs, it is all but certain to roil bond and currency markets. In such an uncertain environment, investors put their money into gold and silver as a way to safeguard their money.

Gold for August delivery jumped $15 to settle at $1,631.20 an ounce. September silver rose 31.2 cents to $40.106 an ounce.

"The market is losing confidence that the U.S. government can effectively execute government policy," said Erica Rannestad, an analyst with CPM Group. "Gold and silver are generally purchased ... when the political arena looks unstable."

All other metals contracts fell because their value is tied to economic activity as raw materials for factories.

October platinum fell $7.10 to $1,785.30 an ounce and September palladium dropped 40 cents to $827.70 an ounce.

September wheat fell 20.75 cents to settle at $6.725 a bushel, December corn fell 17.50 cents to $6.6875 a bushel and November soybeans lost 14.25 cents to $13.5725 a bushel.

Energy prices also fell.

Benchmark crude for September delivery fell $1.74 to settle at $95.70 per barrel on the New York Mercantile Exchange.

In other Nymex contracts, heating oil fell 1.5 cents to settle at $3.0994 per gallon, gasoline fell 0.59 cents to $3.0579 per gallon and natural gas fell 9.9 cents to $4.145 per 1,000 cubic feet.