Gold is on its heels thus far today to finish out the week.  As of this post, spot gold is trading slightly lower as the prospects for a solution to the U.S. Government shutdown and debt ceiling crises have improved significantly.

Just yesterday, Republican lawmakers submitted a plan which would extend the debt ceiling by several weeks and therefore could prevent a U.S. Government default which could occur as soon as October 17th.  It is worth noting that during the debt ceiling crises in 2011, gold responded positively to the uncertainty surrounding the issue.  This time around however, gold has behaved in a different fashion.

While we have seen glimmers of safe-haven buying in gold, the metal has had a very difficult time sustaining any real upside momentum. This could likely be attributed to the general sense that lawmakers will reach a last-minute deal as they so often do. Allowing the U.S. to default on its obligations seems almost implausible and it looks as if investors agree with that sentiment.

The news that Janet Yellen was nominated to be the next Federal Reserve chief did not even stir gold prices much. Many had thought that this might be very bullish for gold. Ms. Yellen is a supporter and ally of Ben Bernanke and is widely considered to be dovish when it comes to monetary policy. Under her leadership, it is possible that loose monetary stays intact for some time to come.

The fact that gold did not react to the news in a bullish manner may not be a good sign for the gold bulls. In addition, it does appear that despite all of the current government and budget issues that the economy continues to show signs of improvement which can be bearish for bullion prices. Should the data continue to be positive, gold may remain under pressure as investors seek higher potential returns elsewhere.

The U.S. dollar index is back over the $80 level and strength in the index could also weigh on gold prices.  From a technical standpoint, gold prices remain in a firm downtrend on the daily charts. Gold has now today taken out last week's  lows and looks to be headed lower. While there is some support around the $1250 level in gold, it is quite likely that gold is heading for a re-test of the June lows around $1182.60.  If this level does not hold, gold prices could see another substantial leg lower which could take prices down to the $1000 per ounce neighborhood.