Gold Year-End Rally: Prices Near 6-Month Highs On U.S. Government Shutdown Fears
(Kitco News) - Gold has been capitalizing on gains during the last full week of the year as the U.S. government shutdown continues to rattle markets, and tensions between the White House and the Federal Reserve are still running high.
The yellow metal neared six-month highs on Wednesday, with February Comex gold futures last trading at $1,280.60, up 0.69% on the day — the highest level since July 9.
“There is some safe-haven buying at this point in time because of the partial (U.S. government) shutdown. The dollar against the Japanese yen and Swiss franc has lost quite a bit of value,” said MKS SA senior vice president Afshin Nabavi.
The partial U.S. government shutdown has entered its fifth day on Wednesday and could last into the new year, with the U.S. Senate unable to break an impasse over U.S. President Donald Trump’s demand for $5 billion to build his proposed wall on the border with Mexico.
The Senate is scheduled to reconvene only on Thursday, which postpones the shutdown by at least another day.
On Tuesday, Trump said that the partial shutdown will continue until his demands for finding the wall are met.
“I can’t tell you when the government is going to reopen,” Trump said. “I can tell you it’s not going to reopen until we have a wall, a fence, whatever they’d like to call it. I’ll call it whatever they want, but it’s all the same thing. It’s a barrier from people pouring into the country, from drugs … If you don’t have that (the wall), then we’re just not opening.”
On top of heightened U.S. political tensions, there is friction between the White House and the Federal Reserve, with Trump once again criticizing the Fed on Tuesday.
“They’re raising interest rates too fast because they think the economy is so good. But I think that they will get it pretty soon,” Trump repeated his criticism as he spoke to reporters in the Oval Office.
Trump has blamed Fed chair Jerome Powell for creating economic headwinds by raising rates too fast.
On Monday, Trump said: “The only problem our economy has is the Fed.”
The Fed raised rates by another 25 basis points to a range of 2.25% to 2.50% on December 19, but sounded more dovish.
The central bank announced updated projections of fewer rate hikes for next year, citing financial market volatility and slowing global growth.
There’s a bid in gold that is not going away any time soon, said Todd ‘Bubba’ Horwitz, chief market strategist of BubbaTrading.com.
“There are many who continue to be non-believers in the gold rally, which should only fuel higher prices. Although we expect some selling pressure in the next couple of days, our long-term outlook remains bullish and is now targeting the $1,300 level,” Horwitz said. “We expect gold to hold the higher support level and higher low of $1,250. We will use the expected small sell-off as another buying opportunity.”