Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold Falls, U.S. Debt Ceiling Plan B Insane

Commodities / Gold and Silver 2011 Jul 07, 2011 - 08:24 AM GMT

By: Ben_Traynor

Commodities Best Financial Markets Analysis ArticleU.S. DOLLAR gold prices dropped to $1525 an ounce Thursday morning London time – still 2.5% up from where they ended last week – as stocks and commodities gained and US Treasury bonds fell, while rumors spread that the US Treasury is holding secret debt ceiling talks.


"Despite the push in gold prices, physical selling is subdued with Indian demand still strong," says Marc Ground, commodities strategist at Standard Bank.

"Concerns over Eurozone debt, rising inflation in China, and an upcoming debate on raising the US debt ceiling" should be supportive of the gold price adds Swiss precious metals group MKS.

Reuters reported Wednesday that the US Treasury is secretly discussing how it might avoid a US default if Congress does not vote to raise the $14.3 trillion federal debt ceiling before August 2 – the date the Treasury expects to hit that borrowing limit.

One option reportedly being considered would involve the Treasury delaying $49 billion of Social Security payments due on August 3. This would enable the government to cover payments to government bondholders.

However, it is "not obvious...that the president has the legal authority to pick and choose who gets paid," notes former Treasury official Michael Barr.

Even if President Obama does have the authority, Barr says, it is not clear that such a plan would work "as a practical matter".

"The notion that we would just pay Wall Street bondholders and the Chinese government and not meet our Social Security and veterans' obligations is insanity," says David Plouffe, senior advisor to Obama.

Over in Europe meantime – and after Portuguese bonds were downgraded to junk status and Italian yields breached 5% this week – the Spanish government successfully sold €3 billion of new debt on Thursday.

The new 5-Year bond was sold at a yield of 4.871% - up from the 4.549% Spain offered on May 5, the last time the 5-Year bond was sold.

In Frankfurt the European Central Bank announced Thursday that it will raise its benchmark interest rate from 1.25% to 1.5%.

"This may in fact be Trichet's last interest rate increase," said Julian Callow, chief European economist at Barclays Capital, speaking before the much-anticipated announcement, citing signs of weak growth in many European countries.

"The sands are shifting in the global economy under the ECB's feet."

Here in London meantime the Bank of England voted for the 28th month in a row to keep its main interest rate at 0.5%.

"We see the first rate increase coming in November," says Philip Shaw, London-based chief economist at Investec Securities. 

"But we've been tempted to push that call into 2012...the governor [of the Bank] has made a clear case for keeping rates on hold and not tightening policy to get inflation down rapidly."

Earlier this week campaign group Save Our Savers wrote to each member of the Bank's Monetary Policy Committee urging them "to bring inflation back under control" by hiking rates.

Consumer price inflation rose to 4.5% in May – more than double the Bank's official target.

"The thrifty and the responsible are involuntarily subsidizing the profligate and foolish...with an effective transfer of wealth from savers to borrowers," said a statement from the group.

Save Our Savers estimates that the combined effects of inflation and low interest rates have wiped £50 billion off the value of UK savings over the last two years.

Back in the bullion markets, silver prices sank to $35.79 per ounce during Thursday morning's London trade – still 5.7% up from last Friday's close.

"There doesn't seem to be strong interest" in silver from Asia, one Hong Kong bullion dealer noted on Thursday.

"While we believe silver could continue to outperform other precious metals, we are concerned about persistent levels of volatility," adds a note from Morgan Stanley.

"Consequently, we maintain our preference for gold in the short term."

Goldman Sachs said on Thursday it considers gold to be currently "under-bought" relative to the level of US real interest rates.

"[We] expect current low real rates to motivate a rise in net speculative positions, providing support for a further rally in gold prices."

Goldman Sachs expects, however, that gold prices will peak next year "as US real interest rates rise with the ongoing economic recovery".

By Ben Traynor
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules