Budget Deal Hope Pushes Gold to Three-Month Low

Photo of Trey Thoelcke
By Trey Thoelcke Published
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

On signs that U.S. lawmakers could be making progress toward resolving their differences over the debt ceiling and the government shutdown, gold futures dropped to a new three-month low early Tuesday. That took back gains from the previous session, when prices rose from a previous three-month low. The prospects for a break in congressional deadlock also buoyed the dollar, which added further pressure on gold prices.

Gold was trading at less than $1,260 an ounce Tuesday morning. In late August, the yellow metal was at more than $1,400 an ounce, and in early October 2012, gold was selling for nearly $1,800 an ounce.

Late Monday, Senate Majority Leader Harry Reid said that he was very optimistic about reaching a deal this week to raise the debt limit and to end the government shutdown. That sentiment was shared by Senator Mitch McConnell, the Republican minority leader. However, any deal still has to get past the more contentious U.S. House of Representatives. Further delays almost certainly would lead to a default, as well as further pains associated with the government shutdown.

If Congress and the White House fail to raise the federal debt ceiling by midnight October 17, the federal government will lose its ability to borrow. What that will mean to global financial markets is uncertain. As we said on Monday, if enough banks refuse to accept U.S. Treasury securities as collateral for overnight lending, the result could be a lending crisis that freezes the global financial system. Any shock to the financial system typically boosts the price of gold, and something on this scale could cause demand for gold to skyrocket.

So far, the SPDR Gold Trust (NYSEMKT: GLD) was down about 1.2% early Tuesday morning. Gold miner Barrick Gold Corp. (NYSE: ABX) was about 1.2% lower as well, while Newmont Mining Corp. (NYSE: NEM) was inactive in premarket trading.

Photo of Trey Thoelcke
About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.

Featured Reads

Our top personal finance-related articles today. Your wallet will thank you later.

Continue Reading

Top Gaining Stocks

CBOE Vol: 1,568,143
PSKY Vol: 12,285,993
STX Vol: 7,378,346
ORCL Vol: 26,317,675
DDOG Vol: 6,247,779

Top Losing Stocks

LKQ
LKQ Vol: 4,367,433
CLX Vol: 13,260,523
SYK Vol: 4,519,455
MHK Vol: 1,859,865
AMGN Vol: 3,818,618