On Wednesday, gold (NYSEARCA:GLD) futures for December — the most active contract — jumped $19.90 to close at $1,336.20 per ounce, while silver (NYSEARCA:SLV) futures gained 30 cents to finish at $21.89. It was the first time in four trading sessions that gold and silver closed higher.
Both precious metals received buying support as the U.S. Government continued to bicker about the looming debt ceiling and budget showdown. Republicans in the House of Representatives recently pushed through a stopgap bill by a party-line vote of 230 to 189 that would fund the federal government for the upcoming fiscal year if discretionary spending for the Affordable Care Act is eliminated.
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Both President Obama and Democrats in the Senate, where the party has a majority, have made clear that legislation would not progress any further than the House of Representatives, which makes a government shutdown possible. Without that resolution, significant parts of the federal government could shut down on October 1 and within several weeks, the United States could default on its federal debt.
Treasury Secretary Jacob Lew, in a letter to Congress, said the Treasury will run out of funds no later than October 17. “We estimate that, at that point, Treasury would have only approximately $30 billion to meet our country’s commitments,” he said. “This amount would be far short of net expenditures on certain days, which can be as high as $60 billion. If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history.”
By the end of the trading day, shares of the SPDR Gold Trust (NYSEARCA:GLD) increased nearly 1 percent, while the iShares Silver Trust (NYSEARCA:SLV) edged 0.40 percent higher. Gold miners (NYSEARCA:GDX) Yamana Gold (NYSE:AUY) and Newmont Mining (NYSE:NEM) gained 3.1 percent and 1.1 percent, respectively. Shares of Endeavour Silver (NYSE:EXK) surged 6.8 percent.
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Disclosure: Long EXK, AG, HL, PHYS