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A.M. Kitco Metals Roundup: Gold Weaker As Markets Languish Amid U.S. Government Dysfunction

Tuesday October 8, 2013 8:29 AM

(Kitco News) - Gold prices are moderately lower in early U.S. trading Tuesday, on a lack of fresh, bullish fundamental inputs. The focus of the market place continues on the closure of the U.S. government and lack of progress regarding U.S. lawmakers getting their book-keeping house in order. December Comex gold was last down $6.90 at $1,317.90 an ounce. Spot gold was last quoted down $3.40 at $1319.50. December Comex silver last traded down $0.121 at $22.27 an ounce.

The partial U.S. government shutdown drags on and is in its eighth day with still no serious movement from either Democrats or Republicans. There were reports overnight that some “test” bills are being discussed among the Senate and House of Representatives. There is a steady unease in the world market place at present, but there is still not yet anything close to panic. The date now being pegged is October 17—the date at which some U.S. government officials now say the U.S. will start to default on its credit obligations. It appears the budget impasse and government closure could lead right up to the U.S. debt ceiling limit.

Some gold market bulls have expressed frustration their metal has not seen stronger safe-haven demand amid the latest U.S. government fiasco. Some are saying gold has lost its safe-haven mojo because it’s been in a technical downtrend for months. More likely is that the market place now has “U.S. government dysfunction fatigue.” Traders and investors have recently been bombarded with news headlines on the government’s shutdown and debt limit situations. They are numb to the situation, at present. And in the past 18 months U.S. budget and debt ceiling wrangling had also gripped the market place for a time. Most of the market place still feels the U.S. government will pass a budget and raise its debt ceiling at the 11th hour.—but not before the usual grandstanding, jawboning, posturing, bickering and politicking that U.S. lawmakers do in situations like this. However, in the very unlikely scenario that the U.S. government actually starts to default on its debt, or gets its credit rating downgraded by a major credit rating agency, then gold will exhibit its safe-haven status in the market place, and do so in no uncertain terms.

In other overnight news, China’s services purchasing managers’ index (PMI) showed a reading of 52.4 in September from 52.8 in August, according to Markit/HSBC. German manufacturing orders showed an unexpected decline in August, at down 0.3% from July, as a 1.1% gain was forecast.

The World Bank and International Monetary Fund hold annual meetings in Washington, D.C., at the end of this week. It would be at the very least awkward to see the host nation and the world’s leading economy and military hobbled by a government shutdown in effect. Any proclamations or overtures made by the U.S. at the meeting would be at least somewhat discounted by the inability of U.S. lawmakers to agree on a spending plan.

U.S. economic data due for release Tuesday includes the NFIB small business index, the weekly Goldman Sachs and Johnson Redbook retail sales reports, the IDB/TIPP economic optimism index, and the IMF world economic outlook. Most U.S. government economic data is not being released due to the U.S. government closure. However, the Fed’s FOMC minutes will be released Wednesday and will be closely scrutinized by the market place. Federal Reserve officials are speaking this week. Traders and investors will be very interested in seeing what these officials say about the U.S. government shutdown’s impact on the U.S. economy.

The London A.M. gold fix is $1,321.00 versus the previous P.M. fixing of $1,323.50.

Technically, December gold futures bears have the overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,353.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the August low of $1,271.80. First resistance is seen at Monday’s high of $1,329.50 and then at $1,337.80. First support is seen at Monday’s low of $1,307.90 and then at $1,300.00.  

December silver futures bears have the overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $20.63. First resistance is seen at Monday’s high of $22.495 and then at $23.00. Next support is seen at $22.00 and then at Monday’s low of $21.65.

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By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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