Gold has seen two $10 jumps in the spot price in the last 24 hours, as signs on Main St. that the economy isn’t doing so hot increases the unease over a looming government shutdown amid political bickering and brinksmanship in Washington.
Short-covering and some bargain hunting saw gold return to “pre no-taper” levels shortly after the New York close yesterday, where it held strong overnight. Then, Wal-Mart announced that it was cutting order to suppliers for the next six months because its stores were full of unsold merchandise. This held more water with Wall St than an announced increase in new home sales, and gold jumped another $10 an ounce to hold in the $1,335 range. Stocks opened lower, struggled into the green, then fell back into negative territory for the rest of the day.
The dollar trended lower overnight, and continued solidly down during the day. The euro rose back over $1.35, with yen also strengthening. 10-year Treasuries yields fell to 2.62% and the German 10-year bund yields dropped to 1.82%.
U.S Treasury Secretary Lew warned Congress to get their act together, as he could not stave off default on government obligations beyond October 17 at the latest. To add to the joy, the government loses authorization to pay their bills at the end of September, whether there’s any money in the kitty or not. All this increases the odds that the Fed will be in no position to taper its $85 billion a month in bond purchases, which means more money pumped into the system.