Brace for potentially big impacts on the gold & silver “markets”. There are two issues that especially need to be considered…
At midnight on Saturday the Federal Government officially went into “shutdown” mode.
How does this effect gold & silver?
This is essentially a question that requires focus on two issues:
- A government shutdown creates “uncertainty” in the marketplace, which, fundamentally speaking, is bullish for gold & silver.
- If gold and silver spike in price due to the uncertainty, how will the cartel react, but if gold & silver do not spike, will the cartel use the opportunity to smash prices due to lack of federal “regulatory oversight”?
The Commodities Futures Trading Commission (CFTC), the part of the Federal Government responsible for oversight of the commodities markets, which include gold & silver, will be affected by the shutdown.
As of yet, the CFTC hasn’t offered a press release on how they will be scaling back operations:
According to The Hill, here’s what will happen with “financial regulation”:
A government shutdown would halt most of the federal government’s oversight of financial trading. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) would both be forced to furlough thousands of workers responsible for monitoring financial markets. Only SEC and CFTC staffers involved in law enforcement activities or protecting “life or property” would continue working.
All other regulatory and supervisory function of the Wall Street watchdog would pause until Congress funds the government again.
Other financial sector regulators won’t be affected by a shutdown. The Federal Reserve system, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation are all independently funded and would continue their oversight of the banking system. The Consumer Financial Protection Bureau and the National Credit Union Administration are also independently funded and would stay open during the crisis.
Not a lot of specifics there, although Bloomberg is reporting, of all things, that the CFTC will still be keeping “tabs” for Bitcoin futures:
The U.S. Commodity Futures Trading Commission said it would keep tabs on Bitcoin futures trading and other markets during a government shutdown, even though it would be forced to halt many other normal activities.
“One component of the agency’s mission is to oversee orderly derivatives markets, and to police those markets to ensure they are free of fraud and manipulation,” the CFTC said in a statement Friday. “In the event of a shutdown, the agency will have ‘excepted’ staff in place who will continue to perform this function across the derivatives markets — including the virtual currency derivatives market.”
The regulator’s cryptocurrency oversight responsibilities greatly increased last month when the CME Group Inc. and Cboe Global Markets Inc. launched the contracts through a process that allows them to list products after pledging that trading doesn’t run afoul of the law.
Of course, there was no such statement to be found on the CFTC’s website, and trading algorithms take their input ques from a very expensive newswire service called Bloomberg Terminal, so it’s quite possible that the Bitcoin information was “fed” through Terminal (before being published on Bloomberg.com) to garner a specific trading action from the High Frequency Trading algorithms (HFTs).
We can’t be sure.
So what can we say about the impact of a government shutdown on the gold & silver “markets”?
First of all, we know the CFTC is complicit in precious metals price suppression, so it’s not like they are providing any regulatory or enforcement actions in our favor anyway.
But what looks like a clear take-away from The Hill and Bloomberg’s reporting is that the cartel will be given a “free pass” for as long as the shutdown lasts.
For example, taking what was reported by the hill, it’s possible there could be particularly egregious flash crashes in gold and silver, and because the CFTC will have been “shutdown”, they will not “investigate” the the incident or even make a statement about it. The CFTC could also issue some statement as to “in light of the government shutdown, blah, blah, blah, the CFTC will not be looking into the suspiscious trading activity that ocurred at 9:38 a.m. EST on Monday January 22nd, 2018”.
That would be our worst case scenario.
It should also be noted that the cartel consists of two parts: The government and the Fed/banks.
While the CFTC will be in shutdown mode, the Fed, the banks, and the bullion banking cartel will not. They could provide additional heavy lifting as they see fit in order to compensate for as “suspended” CFTC.
But it bears repeating because it is important: The ESF is still functional and we know the government must “manage” the price of gold & silver at every hour of every day, and whether through covert or overt means, the ESF will be on it.
Could any part of the cartel make a mistake and commit an error in our favor?
Sure. Anything’s possible.
Is there a best case scenario?
You see, the ESF is still in effect, operating in the shadows, and you can bet your last dollar they will have fingers are the ready to control any price spikes that may arise due to “uncertainty” and “fear” in the marketplace, which, for all intents and purposes, should be the standard reaction.
That is to say, at the very minimum, a government shutdown is uncertainty in the marketplace.
Gold and silver love uncertainty and should therefore be bid.
The question is how will the cartel react to a flood into the precious metals?
If there is a bid for gold & silver, is the cartel just going to issue paper to stem the rise?
They’ve already been doing that in gold in earnest since mid-December, so things could get out of hand very quickly in regards to open interest.
If the government is still shutdown on Sunday night when the futures markets open, we could be in for a wild ride.
The CFTC’s own silence on the matter is deafening, and we know they are not just going to give gold and silver a free ride.
We will be watching the market and provide an update if there is major movement in the markets tomorrow evening.
What about last time the government shut down?
That happened from October 1st, 2013 to October 17, 2013.
Gold & silver were in the middle of their painful bear market.
The 2013 shutdown began on a Tuesday.
Gold was smacked on that day:
But look at silver:
The swing from the low of $20.63 on Tuesday (Shutdown Day) to the high of 22.04 on Wednesday (the second day) was 6.83 percent.
That would be a big percentage move here in 2018, all things considered.
So grab your popcorn, grab you’re pepto, and buckle your seatbelt come Sunday evening and especially on Monday.
– Half Dollar
Here’s a link for what the shutdown means for the rest of the federal government, as reported by Zero Hedge
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.