Saturday, January 20, 2018

The government has officially shutdown, so what are the expectations for the gold price?

As Congress debated long into the night of Friday on whether to raise the debt ceiling, pass a short-term Continuing Resolution (CR), or simply play politics and let the government shutdown, gold and silver prices recovered a bit from the paper slamdowns they received over the two days prior.

But now that the government has officially found itself absent of money, what has historically been the result for gold during previous periods of shutdowns?

Historical chart of government shutdowns:

Rather than post the charts for gold prices for every single shutdown since 1976, we are going to show about five charts from the past 40 years, and the reactions for gold throughout those past four decades.

In September of 1976 gold soared after being stagnant for most of the year leading up to the September month when the government was shutdown for 10 days.  However as you can see from the chart, once the shutdown occurred gold prices climbed approximately 30%.

Fast forwarding to 1982, which was a period following the bursting of the gold markets and raising of interest rates by the Fed to 21%, the price of gold rose from the end of September through the end of the year in tandem with the start of the shutdown.

Moving forward to the next decade, we will look at the gold price chart for the two shutdowns that took place in 1995 during the later quarter of the year.

Both shutdowns in 1995 occurred in November and December as Congress played the game of Continuing Resolutions until they finally agreed upon raising the debt ceiling in late December.  And during those months the price of gold rose slightly, but did not lose any ground from the bottom set on Nov. 1.

2013 saw the longest government shutdown of the past 40 years as it took Congress 21 days to finally settle on a compromise.  But interestingly, gold did not rise during this three week shutdown period, and instead fell as it appears the banks purposely dedicated manipulation efforts towards keeping the price depressed.

One thing to note back in 2013 is that President Barack Obama called a meeting with 15 bank CEO's at the White House on the second day of the shutdown, and it is believed that these bankers were directing the President on policies for which they and the Treasury were going to do during the time the government was shutdown.  And since they had enacted a policy of gold and silver price manipulation since 2011, it was not surprising that this again occurred at a time when Americans should have been buying gold en masse, and foreigners would have swapped out their Treasuries for the same thing.

Now with the government once again shutdown and without the ability to borrow money to fund services the question for the gold markets is will the price move higher the longer the shutdown continues, or will the banks act in accordance as they did five years ago when they kept the price depressed through the paper markets?

Time will tell.


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