Price Of Gold Related To Government Shut Down
With Senate leaders struggling to draft an agreement to restore the government operations and avert a government default, in just a couple of days away —- resulted in gold prices plummeting down to $1,260.61 an ounce last October 11, or a three month low since July 11. The fall in prices was due to expectations that an agreement will soon be reached between the GOP and President Barack Obama, after talks between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell have ensued. Earlier, negotiations between President Obama and House Speaker John Boehner fell through as no agreement was reached on how to end the fiscal impasse.
The precarious scenario where the market: is anticipating a probable slowdown in Federal budget purchases; currently experiencing a government shutdown that is on its 3rd week, and; the seemingly inaction of the House of Congress as regards to the debt cap limit —- has resulted in gold prices to drop in the last thirteen years. The head of the bullion refiner in Geneva, Switzerland, Bernard Sin, had said that the physical demand of gold had risen lately. Nonetheless, the situation in the US regarding the government shutdown is going to have a major impact on the market’s volatility.
While optimism was expressed by Democratic and Republican senators on Sunday’s national live talk shows, there was evidently nothing to support their words as the government’s partial shutdown entered its third week with the markets weighing down on the short time that is left to avert a U.S. default. Time is running short too for the Senate and the House to come up with an agreement before D-day, or when U.S. borrowing becomes critical. The federal government would start missing payments on the last week of October, per advisories made by the Congressional Budget Office —-and this is what sends jitters to the financial markets.
With regard to the price movement of Gold for immediate delivery, it increased 0.4 percent to $1,276.66 by 9:36 a.m., in London. Deliveries that are scheduled for December, was up 0.6 percent to $1,276.10 per ounce in New York’s Comex. Volume for futures trading fell below the 20 percent average in the last 100 days, as per data released by Bloomberg.
President Barack Obama has reiterated that the negotiations with the GOP will only start after the debt cap is raised, and the partial shutdown of the government is lifted. Reid and McConnell had started talking last October 12 and was optimistic that they were able to cover substantial areas. Senators plan to reconvene in Washington, and for the House to do the same in Congress— so as to reach an agreement on ending the government shutdown. The shutdown has been a source of concern for the financial markets, as the day of reckoning for the lapse of government borrowing limits is fast approaching.
Senate Majority Leader Harry Reid said that talks with Minority Leader Mitch McConnell had begun; with significant progress to end the fiscal impasse, is in sight. However, no conclusive arrangement has yet been farmed out on the particulars of said agreement. Don Stewart, spokesman of McConnell said that there was nothing to report yet. McConnell on his part too, said that it is time for the Democrats to support the plan which is being drafted by Susan Collins, a Republican from Maine —- which ironically, was rejected outright by the Democrats on October 12.
Nevertheless, Reid remains optimistic that the talks were substantive, over a privilege speech on the Senate floor; as the GOP and Democrats remained divided still over issues on federal spending and the prospects of ending the deadlock. With the optimism expressed by both parties in the Senate, it is ironic to note that there was no evidence to substantiate that the government will soon be re-opened. The government shutdown is now entering into its third week and the October 17 deadline is just three days away before the U.S. government can still avert a default.
The deadlock on the increase of the U.S. debt ceiling from $16.7 trillion would wreak havoc to the US and the world economies as pinpointed by the International Monetary Fund’s Director, Christine Lagarde. She further said that any disruption, uncertainty, and distrust in the United States would cause massive dislocation and disruption in all countries in the world. The impact of not raising the debt limit would result to the US government to tip over and succumb to another bout of recession. This was discussed in an interview on NBC’s “Meet the Press Program” over the potential impact of the US government not being able to lift the borrowing limit.
Meanwhile, for exchange traded products, Gold dipped 7.6 metric tons to 1,909.8 tons on October 11, the lowest since May 2010, as compiled by Bloomberg. Silver for immediate delivery increase 0.1 percent to $21.3585 per ounce in London. Palladium was up 0.5 percent to $715.90 per ounce. Platinum rose 0.4 percent to $1,377.30 per ounce.