Higher Gold Prices and Coin Sales Point to Growing Gold Rush

SAN FRANCISCO (Oct 18)  Gold prices in 2013 haven't performed as well as the previous few years - but Washington continues to give us plenty of reasons to buy the yellow metal.

This week showed us how sensitive the price of gold can be to news from Washington.

On the heels on the down-to-the-wire U.S. government budget and debt ceiling deal, gold prices moved abruptly higher and soared above the key $1,300 level.

The last time we raised the debt ceiling, gold rallied 17% over the next 15 days. We got a nice jump Thursday; for the week, gold is up more than 20%.

In afternoon trading Thursday, spot gold was up 3.17 %, or $40.70, at $1,324.40.

Reasons for gold's sharp gains Thursday:

• The realization that the government deal simply "kicks the can" down the road yet again. Under the terms of the Senate deal, the government will only be funded through Jan. 15 and the debt ceiling debate comes up again Feb. 7.
• Chinese credit rating agency Dagong Global Credit Rating trimmed its rating of the U.S. one notch to A- from A. The agency said the agreement in Washington does not defuse worries about the U.S deficit or improve the country's ability to repay in the long term.
• The government shutdown shaved a half-percentage point off U.S. Q4 GDP and also delayed a number of key economic data reports. That makes it highly likely the Federal Reserve will pause on any tapering plans until at least late in Q1 of 2014.
• Heavy short covering.
• A lower U.S. dollar index.

All this is a sign of how valuable investing in gold is when the U.S. government's budget battles spill over into markets - which will continue to happen as Congress "kicks the can down the road."