Many thought that a catastrophic outcome that involved the U.S. hitting the debt ceiling was gold's best hope for a sustained move higher—which left some traders surprised by gold's positive reaction to the deal announcement.
But George Gero, precious metals strategist at RBC Capital Markets, reports that gold open interest fell on the deal even as gold futures rose, meaning that traders were closing their short positions.
(Read more: Wall Street not listening to Washington anymore)
Gero said that people made debt ceiling bets by trading gold and stocks together. "One could have been a hedge against the other."
But now, with the Senate agreeing on a deal and voting about to start, "If you've been using [gold] as a trading vehicle, you want to get out, because there's no more reason to be on the short side of gold," Gero said.
In other words, if you were making a bet on gold and stocks amid the D.C. uncertainty, "You basically want to just square your book now." And for those who were shorting gold on the hunch that it would drop off of a coming deal, squaring their book means closing their short positions.