The closer we get to the debt ceiling being broken the higher the level of fear, and as equities drift lower gold finds itself edging higher.
A true catalyst to get gold back onto a bullish track has been absent for over a year, as even the troubles in Syria weren’t enough to change sentiment. When gold hit its all-time high, above $1900 in 2011, it was due to the US government’s inability to agree the debt ceiling and the panic that ensued; it will be interesting to see if repeated panic in this area inspires similar behaviour.
In the past few years, however, traders have become increasingly blasé towards negative news, and the knock-on effects on save haven commodities have become increasingly diminished. Trading gold has always been an emotive proposition, with buyers of the precious metal historically tending to lean towards long-term holdings.
The inability of gold to charge higher does go some way to highlighting how heavily saturated the market has become with ‘paper’ ETF gold, and it will take a battle from the bulls to see any hope of gold retesting previous highs.
Technical traders will be closely watching the $1325 level as a break above this could well trigger further buyers.