The impasse on US debt ceiling talks has raised the prospect of the world’s largest economy defaulting and kept gold well supported around $1,975 an ounce.
The fact that gold hasn’t managed to climb any higher given the potential seriousness of the economic consequences should no agreement be reached before the June deadline reflects a prevailing view that ultimately the markets believe some middle ground can be found in time. Also given how high gold is already trading, having challenged its record high earlier in the month, there is limited remaining upside potential for the precious metal.
One other factor limiting further gold gains is a slight reassessment by sections of the market on how certain the Federal Reserve is to have now paused on further interest rate hikes. Rhetoric from Fed officials has kept the possibility of more hikes on the table while across the Atlantic, the latest UK inflation data has served as a stark reminder that the challenge of bringing inflation down is far from over.
So for now gold is a holding pattern, unlikely to fall much lower given the lack of progress on US debt talks but equally needing a fresh catalyst, such as an actual default, to push prices back above the $2,000 an ounce threshold.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice.