U.S. Government Shutdown Returns: Gold Surges, Crypto Unmoved

The U.S. government has officially shut down after Congress failed to reach a funding deal – the first closure since 2018 The deadlock halts a wide range of federal programs, while essential services such as law enforcement, border protection, medical care, and air traffic control continue to operate.

Markets reacted immediately. Gold futures broke above $3,900 per ounce for the first time in history as investors rushed into safe havens

The Kobeissi Letter warned that the shutdown “would furlough 750,000 workers per day, costing ~$400 million in daily compensation.”

History Repeats

Shutdowns are a recurring feature of U.S. politics. Since 1976, there have been 20 funding gaps, though most lasted only a few days

The longest stretched 35 days during late 2018 under Donald Trump’s 1st term, erasing billions in lost output.

Historically, equity markets have absorbed shutdowns without lasting damage. Most tended to recover quickly. According to Kobeissi, 86% of shutdowns saw the S&P 500 trading higher a year later, with an average gain of 12.7%.

In the short term, shutdowns often unsettle stocks. The S&P 500 ends higher only about 55% of the time once they conclude, but since 1995, every shutdown has eventually seen equities rebound into positive territory.

Crypto Stays Resilient

Digital assets have largely shrugged off the turmoil. Bitcoin (BTC) hovered near $114,000, up 0.3% in 24 hours, while Ethereum (ETH) slipped 1.5% to $4,130.

The total crypto market capitalization stands at $3.91 trillion, remaining largely unchanged despite the turmoil in Washington.

However, trading volumes and prices in both traditional and digital markets can fluctuate during extended government shutdowns.

Why This Matters

History shows that shutdowns rarely derail markets long-term, but they do inject near-term uncertainty.

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People Also Ask:

What is a government shutdown? A government shutdown occurs when Congress fails to pass funding bills, temporarily halting non-essential federal services. Essential services, like law enforcement and medical care, continue.

How does a government shutdown affect financial markets? Shutdowns can create short-term market volatility, as uncertainty grows. Historically, equities recover over time, and some investors turn to safe-haven assets like gold.

Why do investors flock to gold during a government shutdown? Gold is considered a safe-haven asset. During periods of uncertainty, including shutdowns, investors buy gold to protect their wealth from potential market swings.

Do government shutdowns have long-term effects on the stock market? Historically, shutdowns do not derail markets long-term. Most shutdowns are absorbed, and the S&P 500 has often risen in the year following a closure.

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