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Impartial observers of the precious metal are being given little reason to buy into the commodity, as the historic relationship between gold and a flight to safety appears to have lost its impact.
The US government and its opposition have seen another week pass with no agreement made regarding either the budget or the looming debt ceiling. With only another two days before the US defaults on its debts, if this does not classify as an eleventh-hour issue that could derail global markets I don’t know what does; yet gold is currently only at $1275.
The empathy towards gold can be seen in the relatively firm demand for the physical product, but this is failing to signal an increase in the underlying commodity price. This of course is not a new phenomenon, since the supply of paper gold saturated the markets and greatly contributed to a downfall in the price.
It was also the demand of paper gold that helped the precious metal rise as high as it did in 2011, however, so you clearly can’t have it both ways.