Gold Rebounds as Debt Ceiling Crisis Worsens

Jacob Harper  |

While the government engages in a partisan showdown regarding both the implementation of the Affordable Care Act and the raising of the debt ceiling, investors returned to the supposed security of gold, reversing a three-day plunge on the price of the metal.

Gold spiked on Sept. 19 following the Federal Reserve’s insistence they would not be tapering the $85 billion a month bond-buying stimulus program known as Quantitative Easing. Immediately following the large intraday gain, St. Louis Federal Reserve chair Jim Bullard tamped down enthusiasm, hinting that the taper could become a reality as soon as next month.  His comments sparked a three-day slide for the metal.

However, Congress continues to stall on raising the debt ceiling, thereby putting the US in jeopardy of defaulting on its loans and having its credit rating lowered. There is a further possibility the government, without funds to operate, could engage in a partial shutdown, resulting in great economic turbulence.

Of course, economic turbulence is the ally of gold, and the metal responded to this second debt ceiling crisis by rebounding. December gold rose 1.47 percent to hit $1,336.50 a share.

Gold and Gold Miner ETFs likewise jumped on the yellow metal’s price pop. ProShares Ultra Gold ($UGL) rose 2.02 percent to hit $51.50 a share. The popular Market Vectors Gold Miners ETF ($GDX) rose 3.59 percent to hit $25.98 a share.

Unsurprisingly, the highly leveraged Direxion Daily Gold Miners Bull 3X Shares ($NUGT) was the biggest winner on the day, jumping 10.57 percent to hit $55.85 a share.

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