As shutdown drags on, why isn't gold rallying?

Prices of the precious metal tumbled as low as $1,280 an ounce following news of the government shutdown earlier this week.

By MSN Money Partner Oct 4, 2013 3:13PM

CNBC on MSN MoneyBy Ansuya Harjani

 

Neither the U.S. government shutdown nor the looming debt-ceiling deadline has been enough to boost demand for gold, which slumped to a near two-month low this week. So, why isn't the safe-haven asset catching a bid?

 

According to Dennis Gartman, publisher of the Gartman Letter, the government shutdown is being viewed by some as a deflationary force in the world's largest economy. This is negative for gold as it is often purchased as a hedge against inflation.

 

 "The economy seems weaker. With the closing of the government, and problems going on in Washington, that's a deflationary impact, and that weighs upon the gold market. If you could get strength in the economy you might actually get a bid to the gold market," Gartman told CNBC's "Futures Now" on Thursday.

 

Gold prices tumbled as low as $1,280 an ounce following news of the government shutdown earlier this week, to settle around $1,316 on Friday.

 

Factors that could spark a fresh rally in gold include renewed tensions in the Middle East or the Federal Reserve becoming more accommodative than it has been, he said.

 

Gold Bars © Stockbyte/SuperStockSimona Gambarini, associate director of research at ETF Securities, said many investors are waiting on the sidelines at the moment, but could enter the gold market if risks of a debt ceiling crisis grow.

 

"Investors are on hold. Whoever is in the gold market already, sticks to that. Whoever is not, is waiting to see whether the debate on the debt ceiling is going to get worse, and that's probably when most investors will get in."

 

Time to buy?

 

Jonathan Barratt, founder of the commodities newsletter Barratt Bulletin said gold's performance is a surprise given the number of risks stemming from the U.S.

 

"The market is a little complacent at the moment, the more time that passes the more nervous people will get," he said. "The reality I feel will hit traders when we do not get employment data out of the U.S."

 

Barratt, who is bullish on the outlook for gold, expects prices will rise to $1,470 in the coming weeks. If gold breaches this level, it could hit $1,520, he said.

 

Mike Harrowell, senior resource analyst at BBY recommends buying gold at current levels. "We think growth will reassert, there will be an increase in the debt ceiling limit and this current issue with the government will wash away. We would look at this as a buying opportunity, with a price target [around] $1,450," he said.

 

Todd Gordon, founder of TradingAnalysis.com, however, is skeptical that gold will find support in the near term. "I'm short right now. We have yields down, the dollar's down, stocks [are] down. That's a trifecta for gold to rally and it's not," he said. "When something should be happening and it's not, you got to trade what you see, and not what you think."

 

More from CNBC

Tags: GGGLDGOLD
64Comments
Oct 4, 2013 3:24PM
avatar
Maybe, Maybe not a good time to buy gold. But I will say this, if you're trying to SAVE FOR THE LONG RUN, gold and silver is better than almost anything else available right now. And it has the added benefit of being able to be used ANYWHERE in the world, with NO questions asked.
Oct 4, 2013 4:03PM
avatar
Gold and Silver is simply a hedge against inflation. Not a bad investment but not greatest either. Depends on what your trying to do.
Oct 4, 2013 6:09PM
avatar

When those 800,000 fed workers don't get paid, they don't spend, and fear of not getting another paycheck soon reduces the buying urges.  Just like in the recession, fear begets fear and inventory in stores increase as less is being bought.  High inventories will put pressure on business to lower prices to make sales. 

That's very deflationary.

Oct 4, 2013 4:30PM
avatar

You are right Active, there are people that invest in Gold and others that don't....

Just as simple as that !

 

There are a multitude of ways to invest in Gold...

Simple: Coin or jewelry.

Others: Bullion, or stock in miners and ETFs or Funds.

 

Most of those investments can be cashed in for a currency anywhere, what you make on the deal is between you and the buyer.

Oct 4, 2013 8:02PM
avatar
Do not buy gold. Buy those green pieces of paper called dollars or buy those "invisible" things called equities and let some weasel CEO and his flunkies watch it for you!
Oct 4, 2013 10:08PM
avatar
Gold shouldn't  be consider an investment but a hedge against inept gobments and fiat currencies.

Granted, as anybody that bought a house and held from 2003 all the way to 2008 will tell you that not understanding price cycles will turn you into a bag holder, the same goes for Gold, at 1800$ an ounce was very expensive but now 1/3 off near 1200$ with the national debt of 18 T. And growing; lets say that the cheaper Gold gets the more appealing will be to the masses and they are buying worldwide

Don't be fooled by the MSM. (Main stream media).

Chalan.

Oct 4, 2013 8:03PM
avatar

Thank you RIA

 

Some people are so idiotic that they HAVE to have EVERYTHING explained to them when it comes to economics. And I'm NOT STUPID enough to take a bar of gold to the supermarket. Like you said, you go to a coin shop or metals dealer. And besides a couple of ounces of silver WILL do the trick, and besides, all you got to do is talk to the manager privately in his office. YOU DO NOT NEED a bar of gold to buy groceries.

Oct 4, 2013 9:15PM
avatar
why isn't gold rallying?? is that the real news?? a 34 year old BLACK WOMAN with a baby in her car was gunned down by the obama keystone cops and this is the nonsense we're talking' bout here? you mean to tell me that this obviously unarmed woman's tires couldn't be shot out? there were tons of keystone cop cars around, lo and behold somehow they're still working! gov't shutdown my AZZ!! but I digress...

so they couldn't block that Infinity with about 3 or 4 of them? hmmmm....there was NO GUN found in her car, she didn't point anything that LOOKED LIKE  A GUN to warrant these idiot cops pulling their guns and opening fire like some third world nation like Sudan!! AMERICA HAS TURNED INTO A SICKENING NATION OF PIGS AND DEGENERATE GOV'T THUGS!! AND WHERE ARE YOU AL SIMPLETON?? HMM?? WHERE ARE YOU JESSIE JERKSON? HMM?? WHERE ARE YOUR SORRY BLACK AZZES ON THIS!! YOU VIAL PHONY COMMIE LIBERAL SICKENING VERMIN FILTH!! it's a miracle the baby in the car wasn't killed...and the idiot media tries to sweep yet ANOTHER horrid obama story under the rug....GEE gotta wonder how this would play out if George Bush was president!!

but meanwhile why gold isn't rallying is the story...who gives a rats azz about this nonsense!! THERE ARE NO JOBS!! THE UNEMPLOYMENT IS GOING UP!! AND OSAMACARE IS GOING TO DESTROY WHATEVER'S LEFT OF A ONCE GREAT NATION! ....Impeach that racist anti-Catholic, anti-Semitic, anti-free market, race-baiting black bastard in the white house NOW!!
Oct 4, 2013 8:24PM
avatar

If you can not afford to invest stay away. Gold & silver is a way to diverse your $$. Actual possession is best. Been buying it since the early 90' and found it better than CDs and other items. Can I sell it, yes if need be.

I may buy more at these prices.

Oct 5, 2013 11:38PM
avatar

You tell them Top Cat520

 

God, the IDIOTS, that think gold ONLY comes in pound bars or one ounce coins.

 

Man, did these idiots ever hear of one tenth, one quarter, one half, ounce denominations of gold?  How about silver?  Do all you idiots denigrating gold have a clue on what most people are talking about? Gold IS FOR PUTTING YOUR MONEY into something that HOLDS ITS VALUE IN THE LONG RUN!!! Also it was for LARGE PURCHASES, NOT for going shopping for groceries!!! Jesus, do think people went around in the 19th century [when we were on the gold standard] paying for everything in gold coins?? Why do you think that there were coins made of silver, copper, or bronze???

Oct 5, 2013 4:03AM
avatar

why isn't gold rallying?  well gee whiz, could it be that $4 trillion in US QE (money printing) and trillions more in japan, china, great britain, eurozone, and others has created so much cheap money at zero interest that these huge hedge funds can treat gold like their own little shiny trinket to kick around the price at a whim - and profit wildly from trading the swings that they create??

 

makes you say hmmmm, don't it?  pay the money back first, retire second ben bernanke .... don't just run out on the bill ....

Oct 4, 2013 4:53PM
avatar
how in the world is the govt shutdown a deflationary move?
Oct 5, 2013 9:17AM
avatar

The day will come and it will probably be very sudden. Gold will have it's day and whether it is it's last hurrah or not is yet to be seen.

 

If you are in and holding all you have to do is wait. If you are not in, then you are out and will be chasing higher prices. I am probably older than you and I've learned some lessons and made horrendous mistakes, but I've found patience is most rewarding. I am patiently holding and if you are patiently waiting to buy, well we will just wait and see! 

 

Conditions are just so perfect for Gold and the best part is there is so much more than can go wrong.

Oct 5, 2013 11:44PM
avatar

psychedout

 

That may be so, but with helicopter benny printing a trillion dollars a year, I don't think we're going to get THAT much deflation.

Oct 4, 2013 8:06PM
avatar
Hey Robin, maybe gold "should" be at $450 per ounce, but since it isn't, and has risen MUCH faster than inflation, WTF are YOU bitching about?
Oct 4, 2013 7:22PM
avatar

Because we are in the midst of something that looks like unstable -- but momentary -- equilibrium and so is the rest of the world. Furthermore, if you buy actual bullion you will have to pay commissions --- through the nose --- and you will have to pay them again when you sell. At the same time gold stocks are extremely volatile.

 

I take a cue from the history of Roman Britain,,,  In today's U.K. caches of gold coins and gold jewelry are being dug up all over the place,  left by those who thought that they would be able to come back for it one day.  For those people that 'day' never came.

Oct 10, 2013 12:06AM
avatar

MinorityMandate

 

Hello stupid,

 

READ THE POST!!!!!

Oct 5, 2013 12:15PM
avatar

Minority Mandate

 

Precisely,  which is why you take smaller denomination SILVER coins. Do you REALLY think that back in the 19th century people went to the grocery store [their equivalents, green grocers, meat markets, etc.] with $20 gold pieces? Obviously, you did not think your comment through. Look up the prices, for the 19th century, and you will find that a couple of dollars AT THE MOST would buy a LOT of food, and for a single person, a couple of dollars could buy food for a month!!!  And I'm NOT Talking San Francisco during the gold rush either!!!!!  Even copper and bronze coinage had value back then.

Oct 5, 2013 8:39PM
avatar
Gold around $1300 is pretty fairly priced given the production costs of around $800-1000.  At $800 cost gold would yield 60% margin, $900 yields 44% and $1000 cost yields 30%.  I wouldn't bet on a huge run up of gold prices but the miners could still rack up some nice profits. 
Oct 5, 2013 9:05AM
avatar

When the bill comes due and you have to pay the Piper with tons of Fiat currency that will be worthless, then at least you can wipe your *** with it since you won't be able to afford tolet paper. 

 

Wake up.   While we play the Wall St. and paper money game, China, India and Russia are accumulating all the gold for the day when the house of cards comes tumbling down and gold will replace the paper.

 

At the very least, gold is a metal commodity and everything costs more in the long run even gold. 

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

129
129 rated 1
281
281 rated 2
444
444 rated 3
732
732 rated 4
629
629 rated 5
623
623 rated 6
610
610 rated 7
440
440 rated 8
303
303 rated 9
126
126 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.