How badly will the government shutdown hurt the US economy?
A group of major international banks and ratings agencies have forecast the economic cost of the US government shutdown over the course of 1 week and 1 month.
The negative impact predictions, courtesy of the US Committee for a Responsible Federal Budget, range from -0.2% to -2.0% of annualized Q4 GDP – potentially dangerous given the fragility of the US economic recovery (Q4 GDP growth is expected to be between 2.3-2.5%).
How this damage will affect the price of gold is unclear. Gold markets in the past few days have been highly volatile: leading up to the Oct. 1 budget deadline, gold enjoyed a mini rally, only to drop $40 on the first day of shutdown. Gold has since recovered about 75% of its losses since Oct. 1.
Wall Street business leaders are increasingly siding with the president and losing patience with many House Republicans, who are using their opposition to Obamacare – legislation already passed by congress and upheld in the Supreme Court – as justification for the budget standoff.
If the Congress is unable to reach a budget deal before October 17, the US would default on its debt, potentially receiving a further downgrade to its credit rating.