Even As Deal Is Struck To End Shutdown, Gold Soars

Gold hit a seven month high on Friday, gaining more than 1%. Spot gold briefly broke above $1300 an ounce. Gold futures climbed 1.5% to $1,298.30 an ounce. The SPDR Gold Shares ETF (GLD) climbed 1.46% to $122.86 on volume 10% above the daily average. The 52-week high for this ETF is $129.47. The SPDR Gold Shares ETF is a member of my Perfect 5 ETF Portfolio on my paid subscription sites JugglingWithKnives.com and JubakAM.com. I increased the allocation to GLD to 25% of this 5-ETF portfolio on December 26.

That gold should jump as an agreement was reached to end the partial government shut down might seem odd. After all isn’t gold supposed to be a safe haven in stressful times and doesn’t ending the shutdown make these times less stressful? Well, perhaps gold just isn’t very impressed by a deal that reopens government for a whopping 3 weeks–until February 15. Or maybe gold is responding to other stresses than the shutdown itself.

Among these are next week’s meeting of the Federal Reserve. The Fed is widely expected to hold off on any further interest rate increases. A lack of rate increases weakens the dollar and that pushes gold higher. There is also some speculation on Wall Street that besides not raising rates next week, the U.S. central bank will give some indication that it will slow the speed with which it is reducing the size of its balance sheet. That would also weaken the dollar. (That possibility seems unlike to me at this meeting. The January 31 meeting of the Open Market Committee, doesn’t include a scheduled press conference and the Fed prefers not to make major policy changes at meetings without press conferences. The next meeting with a press conference is set for March 21.)

The Dollar Spot Index (DXY) showed the U.S. currency down a large 0.82% against this basket of international currency.

Other precious metals also climbed today with palladium, which hit a record high of $1434.50 an ounce last week, gaining 2.9% on the day. Silver gained 2.3%. Platinum was up 1.8%.

The Standard & Poor’s 500 gained 0.85% on the day. The Dow Jones Industrial Average closed higher by 0.75%. The NASDAQ Composite moved up 1.29%. And the small cap Russell 2000 climbed 1.26%.

The CBEO S&P 500 Volatility Index (VIX), which rises and falls with the willingness of traders and investors to pay up to hedge risk, fell 7.78% to 17.42 at the close.