It was another wild week for the precious metals market after a 11th hour deal over the debt ceiling Gold put in a knee jerk reaction jumping $40 in overnight trade Wednesday. The metal touched a low of $1276, before turning on short covering and touching a high of $1321 Thursday in the North American session.
The stalemate over U.S. fiscal policy that shut the government for 16 days came to an end after the US Congress reached a short-term deal on the government's debt limit. Avoiding the technical default set to hit today, the compromise extends new borrowing to New Year 2014. Traders have now set thier sights on U.S economic data that was not released during the shutdown. Many feel that the Feds will not "taper" until next year March.
The U.S avoided a default but many bondholders still see trouble in the horizon as the solution is not long term. Chinese rating agency Dagong downgraded US government debt from single A to A-minus this morning, regardless of the debt-ceiling deal.
The physical market remains robust in Asia. Dealers said China and Indonesia saw a slight increase in demand when spot prices were below $1,300 an ounce but slowed after the jump on Thursday. India will celebrate the Hindu festivals of Dussehra this week and Diwali in the first week of November, a period when buying gold is considered auspicious. The traditional wedding season in the autumn is also a key time for gold purchases.
The yellow metal remains range bound and still hasn't broken out on either side of $1250 and $1350. Gold has enjoyed one of its more upbeat weeks, as the US debt extension deal defused the US political and economic crisis for now. Weakness in the dollar was supportive. Markets will now look to economic news and gauge a timeline for when the US Federal Reserve's tapering of its monetary stimulus bond-buying programme will begin.
Spot silver saw the same jump as gold rallying from $20.60 to $22.20 but has failed to hold; on a close basis; $22.00. The metal has benefited from a surge in the equity market as the S&P remains at its highs. Investment demand remains low, but expect dips to be bought on lower prices.
Support $1305/$1300 $21.30/$21.00
Resistance $1330/$1350 $22.00/$22.50
October 18th Closing Prices