This morning’s gold, silver and other-precious-metals plummet is, at first blush, surprising.
The typical response to government uncertainty is an increase in the price of safe haven investments, including metals.
Instead, the government shutdown has precipitated a quick drop.
So what’s going on?
Gold and silver in particular are considered hedges against inflation. But with the US government shutting down (and directing an estimated 800,000 workers to go home without pay) government spending will drop. And without lawmakers spending money, there’s not much need to worry about inflation, especially as the Fed continues tapering in the near-term.
In general, it looks like investors don’t believe the shutdown will stick long enough to create lasting damage. So they continue — for now — to trade stocks. With gold already on a slight downward trend, this means investors aren’t afraid of the hype.
This is especially true since the government shut down most directly impacts buyers in the United States, and gold and silver are global movers.
Others suggest that the price plateau is a waiting game. No one guessed politicians would really let the government shut down. And now nobody really believes it will stay shuttered.
Yet as the events of last night showed, it’s clear that no one really knows what’s going to happen.
With the debt ceiling fight looming in mid-October, it’s likely metals will get another bump. Then again, many folks predicted a surge with the shut down, too.
All told, it’s difficult to predict what the markets’ future holds.
What do you think about the government shut down? Have any predictions for the next few weeks?
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