Gold Tumbles as U.S. Lawmakers are Willing to Raise the Debt Limit

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Gold Tumbles as U.S. Lawmakers are Willing to Raise the Debt Limit
Gold Tumbles as U.S. Lawmakers are Willing to Raise the Debt Limit

Gold Tumbles as U.S. Lawmakers are Willing to Raise the Debt Limit

Amidst the news that U.S. lawmakers are willing to compromise on the nation’s debt limit and end a government shutdown, gold tumbled to a three-month low. The pessimistic outlook for the yellow metal can be judged from the fact that gold futures for December delivery fell 2.2 percent to settle at $1,268.20 an ounce in New York.

According to investors and traders, gold is heading for the first annual loss since 2000 which according to them is the biggest decline since 1981. The pessimism is so pervasive that some investors are losing their faith in gold as a store of value. Their concerns are aggravated by the fact that the Fed may slow the pace of its $85 billion monthly bond purchases.

Goldman Sachs Group Inc. and Morgan Stanley have already predicted that U.S. lawmakers will reach a resolution which will put back the focus on the Fed paring stimulus.

According to investors and traders, they may sell gold next year amid an extended economic recovery for greater profit.

Some analysts believe that as news are coming that central banks are monetizing their gold holdings which may add supply to an already weak market is further eroding the gold prices. The Bank of Japan is concerned about deflation, while India is still clamping down on their imports of gold, which is causing damage to the prices of gold.

India which has a lot of festivals this month and the next has huge demand for gold; however, as the government has imposed heavier duty on gold imports, gold is unable to penetrate the Indian market.

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To contact the reporter of this story: Jonathan Millet at john@forexminute.com