October 16th Midweek Silver Market Update

For the first time since the end of the September, gold and silver have made decent gains for two days in a row. These gains can be directly attributed to the fact that the partial US government shutdown has finally come to an end. The shutdown, which began on the first of October and has since left over 800,000 government employees without work is the direct result of Congress’ inability to devise a budget for this government year.

While solutions to this problem, and the equally important debt ceiling issue, have finally been formulated, reveling in this success is not advised as both deals are temporary in nature. What this means for gold and silver is uncertain as of now, though many are hoping that the spot values of gold and silver will correct themselves after 2+ weeks of losses.

Government Shutdown Finally Concludes

In the lead-up to the first of October, all discussion in regards to the US government’s possible shutting down was mostly casual. The fact of the matter is that many investors and market experts were well aware of the budget crisis and the potential for a shutdown. This is why, when the government shutdown went into effect, the shock you would expect in the wake of such a scenario simply did not exist. This is the culprit behind why the shutdown forced gold and silver to follow other markets and decline as opposed to grow in value due to an increase in safe-haven demand.

As soon as the government shutdown began, precious metals, other commodities, and most markets in general dipped in value. That same dip was expanded upon for the next two weeks as the shutdown defied expectations and persisted day after day.

After the first week of the shutdown, it began being called to investor attention that the US would soon reach its debt ceiling, also known as the point where the US government would be forced to cease borrowing money and would also begin to default on its loan obligations. Prior to the 1st of October, the possibility of the government shutdown and the debt ceiling being reached simultaneously was slim to none and was a nightmare scenario to consider. While worldwide investor anxiety was growing, many feared that the US being unable to formulate a debt ceiling solution or budget resolution would cause a worldwide economic panic. Luckily, however, Congress came up to an agreement on both the raising of the debt ceiling and a budget for this year. This is all fine and good, but therein lies a problem with these solutions, and that is that they are only temporary. The budget that was agreed upon today only funds the government until mid-January, while the debt ceiling was raised just high enough to allow government borrowing up until the beginning of February.

While it is good to see that Congress was finally able to collaborate and reach solutions like adults, the overriding fear is that this same situation we have been a part of for the past two weeks will once more appear in a few month’s time.

Posted in Market News

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