Why Did Precious Metals Get Clobbered This Week?

Precious metals markets got clobbered early this week as gold and silver broke down from their high-level consolidations.

Strength in the U.S. Dollar Index seemed to be the catalyst that got the selling going. One key technical level got breached, the selling intensified.

Gold prices fell below the $1,900 level on Wednesday. Meanwhile, silver plummeted below $24 an ounce and traded as low as $22 on Thursday before recouping some of those losses by the end of the trading day.

Some of the volatility seen in metals and equity markets in recent days is attributable to the failure of Congress and the White House to agree on a new stimulus package, with the focus shifting to filling the Supreme Court seat once held by the late Ruth Bader Ginsberg.

Although the economy is in the process of rebounding from the deep second-quarter contraction caused by virus lockdowns, it is far from fully healed.

In March, President Donald Trump signed the CARES Act, a $2.2 trillion relief bill that included stimulus checks sent to most Americans. It also swelled the federal budget deficit to over $3 trillion.

Such a figure would have been unfathomable just a year ago when Washington was overspending by around $1 trillion.

With a razor-tight election coming up that where both the presidency as well as control of the U.S. Senate are up for grabs, fiscal restraint isn’t the order of the day. President Trump wants more stimulus checks sent out – or else a way to pin the blame on Nancy Pelosi and the Democrats for withholding them.

On Thursday, House Speaker Pelosi and Treasury Secretary Steven Mnuchin agreed to revive negotiations over the stalled second round of coronavirus relief. But President Trump’s expected nomination of a new Supreme Court justice on Saturday could throw a wrench into the process.

Democrats are incensed that Trump is attempting to fill the vacant seat before the election. They are likely to focus on trying to obstruct or delay the confirmation process any way they can.

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