October 16th Midweek Gold Market Update

Gold and silver rebounded a bit on Wednesday after a two-week long slide. During that two week slide, the US government was partially shutdown, leaving over 800,000 government employees without jobs. The shutdown caused most markets to decline, and though a government shutdown seems like the type of situation which would cause an increase in safe-haven demand for precious metals, the opposite was actually true. The reason for this can be directly attributed to the fact that the general American and worldwide public was well aware of the possibility of a shutdown for over a year. The general awareness that a shutdown was possible meant that when the shutdown went into effect it did not create the shock amongst investors that it would have if people had no idea a shutdown was possible.

Even though it took over two weeks, the shutdown seems to be finally coming to an end. Congressional leaders on both the Democratic and Republican sides came together and formed a budget and have raised the debt ceiling just before the US was set to default on its loan obligations.

What Does All This Mean Going Forward?

With all this talk of government shutdowns, debt ceilings, and what Congress is doing or isn’t doing, you may be confused in regards to what all this means for the spot values of gold and silver. Today, Congress reaching an agreement on a budget and raising the debt ceiling was well-received by most markets and translated into positive gains across the board.

While today was positive for gold and silver spot values, neither metal is even close to recovering the losses posted over the 2+ week government shutdown. We will have to monitor how investors react tomorrow and the next few days to really see what direction metals will head in. Many believe that there will be a price correction and that spot values will return to what they were before the 1st of October, though today’s gains were so small that you cannot really use them to forecast a large pullback in regards to the spot values of gold and/or silver.

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