Raw commodities drug precious metals down today, as the U.S. government shutdown began. Neither party in Congress is willing to budge from current positions, so approximately 800,000 “non-essential” government personnel were sent home with no pay, and national parks and museums closed. The dollar and short-term Treasuries were also affected, with T-bill yields spiking.
The stock market however, had a positive day, in the belief that the shutdown would be short-lived and not affect the broader economy. Should the shutdown continue, or resume in two weeks when the debt ceiling is reached, the damage to the economy could be such that the Fed is convinced to not taper easy money policies this month.
Gold actually didn’t have a bad time overnight. It was on the opening bell in New York when a huge sell order went through, which blew through sell stops and beat gold below the $1,300 level. Word on the street is that it was a single large player making a profit-indifferent” dump. The Chinese markets are on holiday, so the shiny metals were without their usual physical support.
In Europe, the Italian government seems to be coming apart at the seams, as officials resign over the political party of media magnate Silvio Berlusconi meets increasing resistance over their threat to bring down the government if their leader is kicked out of the Senate over his 4-year conviction on tax fraud. This is only adding to the nervousness the Euros are feeling over the U.S. government’s inability to pass a budget.
Today’s drop in gold took everyone by surprise, as is often the case when a single major player acts on a personal agenda. Gold basically stayed where it was beaten to today, and tomorrow may be dependent on what (if anything) goes on in Washington overnight. If you were looking for one more chance to buy on the dip, this is it!