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US Budget Impasse Unlikely to Be Ignored Much Longer
US Budget Impasse Unlikely to Be Ignored Much Longer Although gold often gains during extreme events, the start of the first US Federal shutdown in seventeen years last week failed to lift the gold price. Investors appear to be looking through the storm and are focused on assets that will benefit from the continuation of the global growth recovery. Copper and silver, two metals with wide industrial applications, were the primary beneficiaries of investor interest. Toward the end of last week there were tentative signs of increasing market impatience with the lack of progress. The cavalier attitude being taken by politicians about fiscal matters is leading to growing doubts about the ability of US politicians to come to a compromise that will avoid a sovereign default. With the debt limit likely to be breached around 17th October (unless extended), markets are likely to remain volatile and short term news driven over the next few weeks. In the meantime, some investors are taking the opportunity to increase positions in beaten down cyclicals. But if progress on debt negotiations maintains the current stalemate much longer, gold is likely to move back into the spotlight.
ETFS Copper (COPA) saw US$48.6mn of inflows as the global manufacturing environment continues to improve
Inflows into COPA hit the highest level since June. ETFS Aluminium (ALUM) also attracted US$7.4mn of inflows, the highest since August. The US ISM manufacturing index rose more than expected, to a two-year high. While Chinese and European PMIs were slightly below expectations, they continue to show expansion in the manufacturing sector. With central banks across the globe maintaining the status quo, the outlook for industrial metals (and copper being the key bellwether for the sector) is positive barring any fiscal accident
in the US.
Long silver ETPs see US$45.1mn of inflows as the metal’s hybrid status generates interest in uncertain times
Silver ETPs have seen four-consecutive weeks of positive inflows. With the global economy staging a cyclical recovery, demand for silver in manufacturing is likely to continue to rise. At the same time its close correlation with gold provides investors a hedge against worst case scenarios. Because of its dual status, silver uniquely allows investors to play two apparently disparate scenarios – default or cyclical recovery.
Flows into long natural gas ETPs rose US$7.0mn, the highest since August
As fall weather provides cooler temperatures in the US, investors positioned themselves for higher seasonal demand for gas. After prices fell from a mid-week high of US$3.61/MMBbtu to US$3.50/MMBbtu by the end of the week, investors saw a buying opportunity and are likely to continue to accumulate on price dips. With 3.5% less natural gas rigs in operation last week compared to the prior week, supply conditions are also firming up.
Investors redeem platinum and palladium despite positive auto sector news and on-going miner strikes
ETFS Physical Platinum (PHPT) and ETFS Physical Palladium (PHPD) saw US$7mn and US$3.5mn of outflows respectively. Prices of the metals had also slipped 3.6% and 2.5% respectively. That comes despite a 17% rise in Japanese auto sales (to a 14- month high) and a 12.1% rise in UK car sales (to a five-year high). US car sales also remained brisk, despite the timing of Labor Day, distorting the monthly statistsics. Autocatalyts are the primary source of demand for the platinum group metals. The strike that started two weeks ago was still ongoing last week at Amplats. Amplats have been losing 3,100 ounces of production a day since the beginning of the strike.
Key events to watch this week. Investors still remain in the dark as to when key US government compiled statistics, including the non-farm payrolls data that were due last week, will eventually be released. Focus will remain on developments (or lack of them) in the US budget debate. The Federal Reserve will also release its minutes from its last meeting when it surprised the market by not tapering. The Bank of England’s policy meeting will be closely observed after Carney indicated the lack of need for further QE.
Important Information
General
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.
Welcome to the State of Crypto Weekly, an investor-focused newsletter from 21shares that dives into the key trends driving the digital asset landscape.
This week, we’re unveiling our Price Predictions series, unpacking the key drivers for the year ahead:
- Where is Bitcoin headed in 2026?
- Why we think Ethereum can go up to $4,200 this year, and what could drag it down to $1,700.
And, should you find yourself in Davos this week, we would love to connect with you. If you’re up for combining alpine views with crypto conversation, please reach out to our President Duncan Moir, Research Strategist Darius Moukhtarzadeh, or Head of Northern Europe Bernhard Wenger.
Predicting prices is arguably the financial world’s favorite game. In the cryptocurrency market, that interest is multiplied by historical narratives around volatility and market reactions. But what really drives prices? And what do we think is on the cards for Bitcoin and Ethereum in 2026?
WHERE IS BITCOIN HEADED IN 2026?
ETF gravity vs. Macro ceiling
The halving’s influence has peaked. By early 2026, Bitcoin’s price will no longer be driven by this supply shift but by how effectively long-term holders absorb sell-offs from ETFs during shifts in the global economy.
WHY WE THINK ETHEREUM CAN GO UP TO $4,200 THIS YEAR…
And what could drag it down to $1,700
Price action is now driven less by the ultrasound money narrative that shaped Ethereum from 2021-2023 and more by ETF flows and whether real economic throughput on Ethereum can translate into sustainable, profitable consumer applications.
This shift has accelerated over the past quarter as Ethereum’s position as the preferred venue for stablecoins and tokenized assets has further consolidated.
In case you missed it
21shares in the world
Commenting on lower inflation data in the US
Crypto research strategist Matt Mena was quoted on CoinDesk: “This morning’s CPI report has provided the definitive anchor the market needed to clear the lingering data fog from late 2025. Core CPI coming in lower than expected reinforces the Fed’s soft landing narrative and increases chances of further cuts this year, even amid political noise around the DOJ’s investigation into Chair Powell.”
Matt was also quoted on Forbes: ”This Supreme Court ruling on federal tariff authority will be a massive volatility driver for both the dollar and risk assets.”
On our radar
What we’re keeping an eye on
Our senior sales associate, Bruna Cabús, will be on CNN Brasil tomorrow, Tuesday, at 7:30 PM BRT to talk about crypto. In the meantime, connect with her on LinkedIn.
Our very own crypto research strategist Darius Moukhtarzadeh will be speaking at Web3 Hub in Davos on Thursday, January 22.
Connect with us today
If you have any questions or want to discuss a product in detail, please visit our website at www.21shares.com
Digitala valutor
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
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