Gold Bullion rips through $1,320 - Wealth Managers

Fed tapering once again on the back burner because of shutdown's economic damage

Gold blitzed back through the $1,300 level and then some in overnight trading Thursday, topping $1,320 in a 3% surge after Congress ended the government shutdown and approved a temporary solution to the debt-ceiling impasse.Silver also followed suit, breaking the $22 level to hit $22.19 at its peak and notching a 3% gain as well.

The deal, which reopens the government through most of January and raises the debt ceiling into February, ultimately is a can-kicking exercise that enables the federal government's big-spending ways to continue until the face-off resumes in 2014.
"The situation is not sustainable"
"In a nutshell, we are back to business as normal where the U.S. government spends way too much money; which we have to borrow on the global market," Jeffrey Wright of H.C. Wainwright LLC told MarketWatch. "We have no realistic way to pay it back, and even with a 'shrinking' rate of deficits, the situation is not sustainable.

"Gold is the natural vehicle to counterbalance this behavior and is going higher once again," he said.
AvaTrade analyst Naeem Aslan added: "Given that we only have a temporary fix for the economy and the underlying issues are still not addressed, we are far away from being out of the woods. As the shutdown has cost nearly $24 billion for the economy, the challenges which [Federal Reserve] will face will not only be limited to the unemployment rate, repairing the reputation, but also perhaps preparing to accommodate for the debt-ceiling circus which will return in February," he said.
Top Chinese agency downgrades U.S.
China isn't buying Congress' temporary resolution either -- its top rating agency downgraded the U.S. credit grade. "The deal means only an escape from a debt default for the time being," said Dagong, "but hasn't changed the fact that the growth of government borrowing has largely outpaced overall economic growth and fiscal revenues."

Gold also gained on growing realization that the Fed likely won't be tapering at its meeting next week -- and perhaps not even until 2014, when Janet Yellen will have succeeded Ben Bernanke as central-bank chair.
Shutdown inflicts hit to GDP
"The U.S. debt deal is seen (as) positive for gold by market participants, for good reason, since the whole mess is just being postponed by 3-4 months, which makes a reduction of Fed asset purchases rather unlikely for the time being,"Commerzbank analyst Carsten Fritsch said.

"What we've done is some serious damage to fourth-quarter growth," said Bart Melek, senior commodity strategist at TD Securities. With as many as 800,000 people foregoing a paycheck throughout the shutdown, which likely limited spending, the U.S. economic expansion in the fourth quarter is likely to be 0.4% and 0.6% lower. "If the Fed didn't feel comfortable tightening policy or removing accommodation in September, it's even more likely to be reluctant to do so now," he said. 
"This is just too tender a moment"
Two Fed officials -- a hawk and a dove -- were making the rounds Thursday underscoring that no-taper notion.

"Reckless" U.S. fiscal policy will likely force the Fed to stand pat on monetary policy this month, said Dallas Fed chiefRichard Fisher, one of the Fed's biggest critics of the bond-buying stimulus program known as quantitative easing (QE). "My personal opinion is that (tapering's) not in play," he saidTuesday. "This is just too tender a moment. ... I personally would have a hard time arguing for us to dial it back" this month, he said.

And Chicago Fed dove Charles Evans echoed that message. "The data are still not definitive enough to say that now is time to adjust the QE3 flow purchase rate," Evans said. He would personally like to see "more steady, solid growth" in GDP data to be confident in the enduring strength of the labor market. 

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