For the second week in a row, news headlines were dominated by the ongoing partial US government shutdown. In all, gold and silver did not fare well this week as both metals recorded losses. Gold, in particular, suffered major losses and is once more below the $1,300 threshold. With the US about to hit its debt ceiling, it  seems as though problems are mounting faster than they are being resolved.

The G-20 meeting of finance ministers kicked off yesterday in Washington DC, and as expected, the first day’s primary topic of discussion revolved around the US’ plethora of problems and how the scenario can quickly deteriorate into global economic panic. 11 days later and over 800,000 US government employees continue to be out of work with no real way of bringing a paycheck home to feed their families, though it seems as if Congress couldn’t care less.

In It For the Long Haul

If you thought that one week was enough for Congress to agree on a budget, boy were you wrong. Now, in day 11, we have to cope with the harsh realization that Congress is no closer to a budget agreement now than they were over 10 days ago. In fact, many people have described both Democrats and Republicans as “digging their heels in”, meaning that both sides are preparing for a long battle. With both sides as stubborn as ever, it is unsure where a solution will be derived from.

All of this is causing worldwide investor anxiety to rise. Markets have been very volatile while the precious metals market has seen more or less direct decline. So many people are curious as to why safe-haven demand for precious metals never set in amid the government shutdown, though the answer to that is seemingly simpler than most would have imagined. Because the US and the world has known about the budget deadline for well over a year now, the shock wave usually sent through the worldwide economic marketplace in the wake of something as large as a government shutdown just doesn’t exist. Instead, investors have been gearing up for the shutdown and were not the least surprised when October first rolled around and no budget had been agreed upon.

Now, the situation is evolving and will soon include the debt ceiling debacle, which will see the US begin to default on its loan obligations if the debt ceiling cannot be raised before October 17th.

If the debt ceiling deadline and the government shutdown overlap, investor anxiety will likely be transformed into investor panic and finally investors will see the safe-haven demand for precious metals spike that they have been long awaiting.