Yesterday’s Markets and Money ended with ‘buy gold’. It’s been a tough start if you did. The precious metal fell 2% in 10 minutes last night and another 1% since. It seems funny that a lump of inert stuff can change in price so fast.
So what happened? Reuters reckons the gold price tumbled because it didn’t rise: ‘Gold prices sank more than 3 per cent overnight as investors sold on frustrations that the metal did not rally after the US government’s partial shutdown.‘Quality journalism that one.
The Australian Financial Review is a bit more helpful this morning. It pointed out that an ‘unusually large trade‘swamped the market. Remember, the precious metals markets are not manipulated, according to regulators. Unlike every other market out there from LIBOR to currency markets and everything in-between.
The government shutdown in the US continues to raise a lack of problems for the media to write about after it predicted chaos. Instead of an economic crisis, other dramatic events are taking place. The Klu Klux Clan had to cancel a rally in a closed national park, some war veterans broke into a closed war memorial, and public transport in Washington is eerily empty. Heady stuff.
In fact, commentators are so desperate for shreds of economic chaos resulting from the US government shutdown that they’re turning to their trusty basket case of last resort – Europe. ‘Fears US shutdown could derail euro zone recovery‘ is the AFR headline. The sub-head is even funnier. Quoting the White House’s press secretary, it says ‘Consequence of Government Debt ‘Unknowable’ but ‘Catastrophic’‘.
How can something be unknowable and catastrophic? Even better, the headline is obviously supposed to be directed at a debt default, not just government debt. So it ends up making our point that it’s too much debt that’s the problem, not the limit on borrowing.
Anyway, the logic on bringing Europe into the discussion has something to do with trade between the US and Europe and the financial crisis that would result from a US debt default. But in reality, investors decided to sell off US Treasuries and move to European bonds in search for safety, so it looks like the US budget crisis is lending a hand to Europe…for now.
Something to keep in mind with all this government shutdown talk is that this is the 18th time since 1976 that it’s happened. So be sure to panic.
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From the Archives…
The Fed Does the Reverse Volcker and Targets the US Unemployment Rate
27-09-2013 – Greg Canavan
How Much Juice can Australian Property Have Left?
26-09-2013 – Greg Canavan
Nothing Lasts Forever…Especially Easy Money
25-09-2013 – Chris Mayer
The Unintended Consequences Brewing Thanks to the Federal Reserve
24-09-2013 – Greg Canavan
The Market’s Declining Response To ‘Open Mouth’ Operations
23-09-2013 – Dan Denning