Gold Prices Spike Higher Today, Default Fears Grow

LONDON (Oct 14)  Gold prices are back to their bullish ways this morning as fears of a default grow. Investors were optimistic about a deal getting done on Friday, but that fell through. Talks between the House and President Obama fell apart over the weekend. Now, focus shifts to the Senate.

Gold is up 1.2% this morning at $1,286/oz. All eyes will be fixated on Washington this week. Congress has until October 17 to get a deal done, or the U.S. will be in default. Investors are expressing their nervousness by sending equities lower, and safe haven plays such as gold higher.

Since the House negotiations fell apart, it looks like it’s up to the Senate to get a deal done. Senator Bob Corker, R-Tennessee, said a debt deal in the Senate is “very possible.” That’s all well and good, but it still doesn’t solve the problem. It’s not the Senate that’s holding everything up, it’s the House. The question is when will Boehner push a bill onto the House to vote.

Boehner has until Thursday to do something. It’s hard to believe that Washington would let the country default when they have the votes to get a clean debt ceiling raise passed. If there isn’t some major progress today, look for investors to start giving Washington a reason to get a deal done. The markets will tank more day by day if a deal isn’t reached.