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Will the Government Shut Down Affect the Price of Gold?

Will the Government Shut Down Affect the Price of Gold?

A government shut down isn’t something gold owners want to continue. The price of gold could be negatively impacted due to the shut down of the US government. The big concern investors have with all market investments right now is the risk that the US will not pull a budget together in time to avoid defaulting on its incredible debt. In short, without an increase to the debt ceiling, lawmakers are pushing the country closer to default, which in the eyes of any investor is bad news.

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This has placed a lot of fear into the markets around the world. Though some of the European and Asian markets seem to be holding back, the US stock markets have already taken a hit overall due to this fear. The fact is, a lack of confidence in the US government could trigger a massive slide, causing millions of dollars worth of loss very quickly. As the government shut down continues to draw on, this risk simply grows and puts the markets more at risk.

But, What of the Price of Gold?

Interestingly, though, the price of gold is not as clear cut as what many would like to believe. In many cases, the market trends of current months may or may not hold true if the US government shutdown continues. Gold is a unique investment; it is one that may or may not take the same course as it has previously.

Traditionally, gold has been the go to option for investors. Gold tends to hold its value very well over the long term. Though it sometimes dips in pricing for a short period, by looking over the long term, it is clear to see that gold prices continue to go up consistently. This is often why gold is called the safe haven investment.

In times of trouble, investors move away from stocks and currency investments. There is simply too much risk in these markets to make them worthy of investment. With the US government shutdown, this means there is too much fear in the US dollar and stocks. And, it may signal a time for investors to move into these safer investments. As a safe haven investment, gold tends to attract investors in times like this, including political strife.

Yet, what may happen is not clear. Some experts believe this could be a very different scenario. In recent days, the price of gold has traded flat. This type of price action is not the most expected occurrence and that has many experts wondering exactly what the price of gold will do should this type of shutdown, and the economic uncertainty that comes with it, will cause. This flat trading is a direct contrast to what normally occurs when a crisis event is taking place.

Time is a Factor

One of the considerations many experts have is the length of time it will take for the US government to get back on track. Many experts believe the price of gold has not moved significantly because, among other factors, it simply has not been long enough. Many people believe that there is no real risk because they believe Congress will pull together before the shutdown looms too large or the debt ceiling timeline runs out. This confidence in the US government could be one of the reasons gold hasn’t see a massive increase in the first days of the shutdown.

Yet, time is a big factor. Should the shutdown continue, which some people believe it will, it will lead to risk building and, ultimately, in the need for investors to move into safer haven investments, including precious metals. If this carries on too long, gold prices will rise significantly as more investors move into this investment method over others.

Is Gold Not a Factor?

Some experts state that a government shutdown simply will not affect gold much. They argue that only the stock markets and the US dollar currency trading will experience a negative impact from the shutdown only. They use old data and the current quiet precious metal market to get an idea of what could occur.

Yet, there is already evidence that the markets have been negatively impacted. The stock markets are likely to take a big hit. For example, some experts warn that if the US government can’t get it together and the shutdown lasts for as long as three weeks, as much as a five percent decrease in the stock market could take place in that shutdown. Currency markets around the world have already being impacted, with the euro and yen being two of the biggest changes. Will a lack of trust in the US government impact the US dollar and even the price of gold, then, too?

What Gold Holders Should Do

If you are in need of money right now, cashing in your gold may be just fine. Investors who believe there will be a short term shutdown really have nothing to fear in terms of the price of gold falling. For other people, though, this may not be as clear cut. There’s little reason for individuals to sell off right now, unless they are beginning to see the price of gold rise (which could happen in as little as a day should worsening conditions occur.)

What Gold Buyers Should Do

Individuals in the market for gold right now may wish to make their play. Should the shutdown continue, it is likely that prices will rise, allowing these individuals to earn a significant amount of profit in the short term. Yet, this is not a guarantee and there is no real way to know what the market really is going to do. Like all investments, do not count on the value of gold springboarding to the highest level in just a day’s time.

Will it increase? Will it hold steady? It is hard to know. Yet, one thing investors should keep in mind is again that gold is a safe haven. It is the type of investment that will hold its value long term, even if a dip occurs in the short term.

For this reason, it may be time to invest. You can buy and sell gold in Boca Raton, for example, and get a fair price for it. If you believe the value will drop, which is may if the shutdown remains short, sell now. On the other time, you may want to sell gold in Boca Raton as you begin to see rates improve. In all cases, gold is at an excellent value right now, making it the ideal time to sell if you need to.


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