Precious metal is feeling unloved even as government debts are spiralling.
US debt ceiling negotiations could raise metal’s profile, according to experts. The latest major gold deal suggests UK gold producers could be cheap.
“Gold haters may be perplexed to see the precious metal holding firm above $2,000 an ounce even as the US inflation rates cool, but gold bugs will point to the ever-growing US federal deficit and how the debate over the debt ceiling is warming up on Capitol Hill,” says AJ Bell investment director Russ Mould. “The US Treasury Department has already acknowledged that the deficit for the first half of fiscal 2023 alone is $1.1 trillion, so its forecast of $1.4 trillion for the year to September looks optimistic. While the US will not default, it will keep raising the debt ceiling and possibly have to print more money so it can do so, especially as interest bills on the borrowing are going up. More debt ultimately begets more debt.
“House of Representatives Speaker Kevin McCarthy and the Republicans are pressing for agreements on budget cuts as part of a deal to agree on a new debt ceiling, while President Biden and the Democrats do not seem keen on any strings being attached to any deal. This is understandable given the Democrats’ planned welfare and green investment programmes, as well as the approaching Presidential election in November 2024.