Gold News

Debt Ceiling "To Drive Gold Price" as US Treasury Gives 3-Week Deadline

The GOLD PRICE held near 4-session highs of $1339 per ounce in London on Thursday morning, keeping yesterday's 1.6% rise after US Treasury secretary Jack Lew warned that the government's "debt ceiling" will be reached in just 3 weeks' time.
 
World stock markets ticked lower with major government bonds.
 
The gold price for Euro and UK investors pushed higher as their currencies slipped vs. the Dollar on the FX market.
 
"Extraordinary measures will be exhausted no later than October 17," Lew wrote to House speaker John Boehner, urging Congress to raise the United States' $16.7 trillion debt ceiling.
 
Estimating that the Treasury will have only $30 billion in hand by that deadline, Lew said net expenditure can reach $60bn per day.
 
That's equal to $191 for every member of the US population.
 
"If we have insufficient cash on hand," says Lew, "it would be impossible for the United States of America to meet all of its obligations for the first time in our history."
 
Analysts at ANZ Bank said in a note today that they expect headlines around the US debt ceiling "to drive" the gold price and other precious metals.
 
Silver bullion also rose early Thursday, before dropping 1.5% from its own 4-session high of $22.11 per ounce.
 
Industrial commodity prices ticked higher, but European Brent crude oil held below $110 per barrel.
 
The gold price "could receive something of a bid over the short-term," says INTL FCStone's Edward Meir, "as worries rise over the debt ceiling talks.
 
"But we doubt whether this variable alone will be enough to keep the complex elevated for long."
 
Turning to US monetary policy, meantime, last week's vote by the Federal Reserve to continue buying $85 billion of Treasury bonds through quantitative easing "will not only stem the rise in real yields," says Deutsche Bank in a note, "but also remove important interest rate support for the US Dollar.
 
"On this basis, we expect this will introduce a strong floor to gold prices, and may even provide some upside risks."

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals