What will a US government shutdown mean for commodity prices? [Video]

There is no denying that the current macroeconomic backdrop is fuelling a “perfect storm” Commodities positioning the entire sector firmly on track to outperform every other asset class out there for a third consecutive year running!

In this year of "unthinkable macro surprises” – traders have turned their attention to the next big money-making opportunity brewing on the horizon: a U.S Government Shutdown on Sunday 1 October. 

Playing chicken with the economy is not unusual for Congress and the President. The looming shutdown will be the fourth in a decade and comes just four months after a similar standoff brought the federal government within days of defaulting on its $31 trillion debt. 

No country should run fiscal affairs as high drama. Greece in 2015 and the UK last year offer cautionary tales of what goes wrong when politics and the public finances collide. It's undoubtedly a very dangerous game to play with the economy and financial markets, but yet U.S politicians do not feel they need to learn from the mistakes of other countries. 

The U.S government is just days away from a shutdown that will disrupt many services, squeeze workers and roil financial markets – at a critical time when the economy is already burdened by the highest interest rates in decades, surging energy costs, autoworker strikes and re-accelerating inflationary pressures. 

According to economists, this “multitude of hits all arriving at once” has increased the possibility of another "black swan event" occurring in the fourth quarter of the year. 

Furthermore, Moody's rating agency warned that the U.S will be slapped with a “negative credit rating” if a government shutdown were to occur. 

Back in August, Moody’s rival Fitch Ratings downgrading the U.S credit rating from AAA to AA+ due to successive government standoffs over the nation’s debt ceiling. A move which sent precious metal prices skyrocketed to multi-month highs – with many notching up spectacular double digit gains – literally in a matter of days. 

During times like these, finding a safe place to store money becomes particularly important, which would explain why Commodities are everyone’s favourite trade right now! 

According to a report released by the International Monetary Fund – Gold has become the world's number one asset class of choice for those seeking protection, diversification and high returns on offer in this current economic climate. 

Even Costco, the wholesale retail store is selling 24K Gold bars and they are selling out within minutes! 

The second most popular asset as revealed by the report, was Silver. Follow closely behind by Agriculture in third place. 

Whichever way you look at it, one thing is clear. The case for Commodities in a well-diversified portfolio has never been more obvious than it is right now! Any substantial pullbacks should be viewed as buying opportunities because prices won't stay low for long! 

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions: