Gold Joins the Equity and Oil Rally on D.C. Budget Deal

Michael Teague |

Gold prices rebounded after a slight dip in early trading on Wednesday, after US politicians announced an agreement to end over two weeks of truncated government, and barely avoid a default on the nation’s debts.

Yellow metal slated for December delivery had advanced 0.62 percent to $1,281.10 per ounce ahead of the closing bell on New York's COMEX, extending the rally into its fourth day. The seeming impossibility of a deal to raise the debt ceiling and reopen vital government services that had characterized the most recent impasse right up to the Wednesday morning announcement had allowed gold, however briefly, to resume its role as a safe haven during times of uncertainty.

If the last three days saw the metal higher as a result of potential calamity, Lido Isle Advisers president Jason Rotman explained Wednesday’s movement as technical, saying “We believe gold may be finding some buyers here below $1,300, and would not be surprised to see a rally back toward the key $1,300 level, mainly on technical buying.”

The Senate deal that is likely to be voted on by congress on Wednesday is expected to extend the US borrowing limit until February and fund the government through January of 2014. It is a temporary fix that could leave enough uncertainty lying around to provide some price support for gold in the coming months. At the same time, the debt-limit delay is likely to push the formerly dreaded tapering of federal stimulus off until such time as the situation can be solved in a more permanent manner, and giving investors more incentive to move into riskier assets.

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