Bullion bulls rejoiced as the standoff or the shutdown of the US government (due to non – passage of the US budget) was solved temporarily.
Also, Republicans and Democrats reached an agreement to increase debt limit for the time being.
The government expenditure is likely to increase, which would be helpful to continue QE-3, put dollar under pressure and thus provide support to the gold rally. During shutdown period it has become easier for gold to decline due to absence of government data. It was believed generally that the government would default and gold regain its safe heave status and if agreement would reach on budget then gold prices would crash. Now, such all rumours have proved wrong and bears are forced to run for cover. Now, once again there would be shortage of physical gold in the market and consequently forward lease rate of gold would become negative. There would be imbalance between physical demand and supply in the market. It is surprising that the negative lease rate event is taking place at such a time which is the period of Asian physical demand. There was another bad news from China for bears. US govt shutdown and the debt limit saga seems to have given the shivers to the Chinese with their rating agency, Dagong Global Credit Rating, downgrading US credit rating from “A” to “Minus A”. This news was heaven sent for bulls. Gold surged $1290 level and shorts got stopped out. Prices corssed $1320 & 1321. As soon as the news flashed, within no time, shorts at the price ranging from $1283 to 1381 were triggered on the electronic platform. All these traders were said to be algos of CTA’s. Bears also shorted and market witnessed crash. Whenever prices are near to Cost of production of ~ $1200, support is provided by the players of price (bhavna vepari).
Currently, people got too heavily short but we think they did a too much of it…