Gold sank 3% to $1,289 on a day when the United States government shut down – the first time in 17 years.
Analysts are scrambling to make sense of the collapse, citing a range of factors including:
The day ended with a chorus of bearish calls, with ratings agency Fitch claiming that a gold rebound is unlikely and that there is no $1,200/oz floor – an idea supported by, among others, the Thomson Reuters gold survey.
Traders will keep a close eye on Washington’s political brinkmanship that could ultimately lead the United States to default on its debt obligations on October 17. Failure of Congress to reach a budget deal before then could send the US economy back into recession.
US debt-ceiling drama sent gold to a record high of $1,920/oz in September of 2011.