Gold Sharply Lower, Hits 7-Week Low, amid Raw Commodity Market Sell Off
NEW YORK (Oct 1) Comex gold futures prices sold off sharply and hit a fresh seven-week low in early U.S. trading Tuesday, after holding modest gains overnight. Sell stops were triggered to exacerbate the selling pressure in both gold and silver markets. The U.S. government is now partially shut down as the October 1 deadline for a government budget plan was not met by U.S. lawmakers. December Comex gold was last down $34.00 at $1,294.00 an ounce. Spot gold was last quoted down $32.60 at $1295.75. December Comex silver last traded down $0.813 at $20.92 an ounce.
The market place is greeting the U.S. government shutdown news with risk aversion so far Tuesday. If this latest U.S. government debacle drags on, many markets will become even more skittish. Presently, most of the market place expects the U.S. government shutdown to be short-lived. In mid-October the U.S. government will hit its borrowing limit. If that matter cannot be agreed upon by U.S. lawmakers in a timely manner, it could be a much bigger event for the market place than the current budget impasse. Fresh budget news coming out of Washington Tuesday could be market-sensitive.
The other factor causing some risk aversion in the market place early this week is turmoil in the Italian government regarding a scandal involving former prime minister Berlusconi. Many Italian government officials have resigned.
In overnight trading gold saw some mild safe-haven buying interest due to the U.S. budget and spending debacle. However, as the trading cycle moved to North America, gold prices came under strong selling pressure, including sell stops being triggered in quick fashion. The U.S. dollar index and crude oil prices are also weaker on the lack of progress on the U.S. budget. “When in doubt, get out” is the mantra among many market players Tuesday.
In other overnight news, the Markit purchasing managers index (PMI) for the European Union fell to 51.1 in September from 51.4 in August. A reading above 50.0 suggests economic growth. The EU PMI shows the bloc’s economic recovery is still fragile. It was also reported Tuesday the overall unemployment rate in the EU was 12% in August—the same as in July.
China is observing the Golden Week holiday and market activity in the world’s second-largest economy will be quiet the rest of the week.
U.S. economic data originally due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the U.S. manufacturing PMI, construction spending, the ISM manufacturing report on business, the global manufacturing PMI and domestic auto industry sales. The government shutdown will start to impact the release of U.S. government’s economic data.
