How the US debt decision will affect gold

How the US debt decision will affect gold

The decision to raise the U.S. public debt ceiling will put strong pressure on the dollar and the Treasury market. In the short term, this could lead to a correction in gold prices. Following the public announcement of a US national debt deal, the price of gold fell slightly. The price of gold may fall even lower when it is known that the U.S. House of Representatives has approved a plan to increase the country’s national debt. The price of silver was also influenced by the decision of the public debt and fell below $ 40 an ounce.

Despite this, prices of $ 1600-1580 per ounce will remain the basis of gold. If the correction is even stronger, gold could drop to $ 1,500. However, there is reason to doubt the possibility of a large price correction. In addition, any sharp decline in the price of gold becomes a good buying opportunity.

An increase in the U.S. public debt ceiling does not eliminate its causes. Again, politicians simply postponed their solution by forty more, focusing on short-term threats rather than tackling the problem of exponential debt growth. All this will lead to an even greater financial crisis in the not too distant future. Some analysts say that “budget cuts are not cuts in spending, but only cuts are increasing.” In other words, U.S. government spending will increase, and with it, the budget deficit. Apparently, many did not understand the seriousness of paying 40% of the expenses in debt.

However, investors are increasingly aware of the gravity of the U.S. financial situation, and even traditional investment firms are beginning to see gold as a safe haven and an alternative to the U.S. dollar and debt bonds. Several leading analysts recently raised their forecasts on the price of gold to $ 1800-2000 per ounce in 2012, and under certain circumstances even in late 2011.

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