Gold Bars Zurich April 2013
Gold bars in the vault of the branch office of precious-metal trader Degussa in Zurich. Reuters

One question has weighed on gold markets in the past several days as gold hit a three-month low on Tuesday: Where have all the gold bugs gone?

Despite delayed tapering of bond buying by the Federal Reserve, a government shutdown and political brinkmanship over the U.S. debt ceiling, gold simply hasn’t benefitted.

Gold trade has slowed in key markets worldwide as investors lose interest in the yellow metal, according to bank analysts like UBS AG’s Joni Teves and HSBC Holdings PLC (LON:HSBA) gold analyst James Steel.

“Heightened ambiguity regarding monetary and fiscal policy in the U.S. is keeping many investors sidelined,” wrote Teves on Tuesday, in a research note.

Over the past several days, gold has been “trapped” within a narrow price range, with both bullish and bearish investors failing to spark rallies or drag the metal down below key thresholds. October could be the weakest month in the year for gold trades on the New York Comex commodities exchange, wrote Teves last week.

Precious metals enthusiasts simply aren’t playing the game, it seems.

That’s surprising because past policy deadlocks generated gold price upswings, or at least busy trading. Gold’s supposed role as a safeguard against inflation, political crisis and equity market depression may be coming under question.

But subdued prices and trades haven’t unnerved longtime gold bugs like Anthem Blanchard, CEO of U.S. gold bullion seller Anthem Vault. Blanchard still believes gold is a safe haven.

“I’m a believer that the current shutdown is really more of a distraction from the root cause of gold going up,” said Blanchard to International Business Times, citing substantial federal deficit spending as bullish for gold. “I don’t foresee any of the debate going on at present really affecting that issue.”

Gold’s failure to rally stems from fears over Fed tapering, said Blanchard, who holds that tapering could be quickly reversed, if markets lack the stomach for reduced monetary support.

Even the debt limit debate, perceived by markets as far more important than an ongoing government shutdown, has failed to boost gold prices, as it has in the past.

Debt limit uncertainty won’t provide a higher floor for gold prices or gold price upsurges, CPM Group commodities trader Carlos Sanchez told IBTimes last week.

The last debt ceiling debate saw gold prices spike partly because Europe entered recession again then, he said, but this time around the markets haven’t felt the need to react.

Gold could return to recent lows of $1,180/oz, as investors obsess over monetary policy and interest rates, and stay relaxed about government dysfunction, he said.

“Right now the expectation is: Everything is steady as she goes, and this is just politics as usual, and we’re going to get past this,” said Sanchez.

A neglect of nontapering news headlines has been a characteristic of gold markets lately, according to Scott Carter, CEO of Lear Capital, a precious metals retailer with $350 million in annual revenue.

Ostensibly bullish news like the Fed nomination of the dovish Janet Yellen has been downplayed, he said to IBTimes. Soaring physical demand from Asia has also been sidelined.

Even if politicians raise the debt ceiling, typically a positive signal for gold, the surge should be relatively small, according to EverBank Financial Corp. (NYSE:EVER) market strategist Chris Gaffney. Narrowing government deficits, which have reached four-year lows, or other positive economic news, could weigh on gold prices, he said.

“There’s negative sentiment in the markets in gold right now,” said Gaffney, who doesn’t hold gold for his wealth management clients. "Really, we’re not seeing inflation. And without any inflationary pressures, I don’t think you’re going to see a big move in the price.”

“The safe-haven aspect of gold has not been needed, and so that’s why we’ve seen gold really trending downward,” he added.

One prominent pattern is that Asian and European gold markets tend to prop up gold prices, while U.S. markets quickly drag it back down with lower bids, said Gaffney.

In other words: “The inability of gold to rally on ostensibly bullish developments is likely a symptom of underlying market bearishness,” as HSBC’s Steel wrote in a note last week.