Gold is lower again after a small resurrection this week thanks to the USA government shutdown. Bullish traders might have thought that the impact of the government shutdown would have been bigger with even bigger economic consequences. But Gold has benefit very little so far from the consequences of Government action.
But it is too early to talk about consequences. Every day that passes could be the tip of the iceberg. Who knows, the shutdown could trigger lower GDP, lower demand for commodities, lower US Dollar, S&P lower ratings and even another civil war.
But what it seems certain, is that it isn’t helping Gold to recover. Technically Gold looks destined to continue trending lower and closer to the 1000 level.
Everybody is talking about the shutdown affecting or impacting negatively on the economy. What about the positive once that the government reaches an agreement and the debt ceiling is raised? The USA economic could end up stronger, not for the last quarter of this year, but next year the economic could go into next gear. Keep an eye on Insurances companies.
If this turns to be better at the end of the day, Gold will have little chance to go back to its highest level.
As long as the shutdown last, Gold could spike towards the 1400-1460 and hold its position till the end of the year. Volatility might increase in Gold and day traders could be back trading Gold and taking advantage of small movement. But a long term investment it could be too long. Next year quick trades should do the trick in either direction.
The other variant is for Gold to fall around the 1225 where it should find support. This will probably occur if the government shutdown is short. Therefore USA economic outlook will remain stable and expected to improve further next year. Gold will then be under pressure and could fall even lower.