While some anticipate that a partial government shutdown ahead has diminished with the announced resignation of House Speaker John Boehner, safe-haven gold assets and related exchange traded funds could enjoy a short-term bounce if a deal does not go through.
“If we do have a shutdown … the gold bugs are going to come out to work here,” Phillip Streible, senior market strategist at RJO Futures, told CNBC.
Investors can also track gold price movements through gold-backed ETFs, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL). The gold ETFs gained about 0.6% over the past week but have declined a little over 3% year-to-date.
Streible argues that safe-haven assets, like gold, will receive a boost if the government is shutdown.
When a shutdown occurs, “people go without paychecks, uncertainty is risen, and everybody gets a little less confident in the federal government – no matter how unconfident they may have started out,” Max Wolff of Manhattan Venture Partners told CNBC.
Congress will be voting to approve new funding for federal agencies on September 30.
Comex gold futures ended around $1,131.5 per ounce Monday. Streible pointed out that gold could be worth a look once it breaks above its $1,151 resistance. Afterward, “we’ll probably push on up to about the 200-day moving average at $1,174,” Streible added.
However, a rally may not last.
“Right around then, coming into the end of the week, we probably see the resolution being done, and gold will probably come off from that,” Streible warned.