Gold has slid down to around $1,950 an ounce as talks on the US debt ceiling finally seem to be heading in a positive direction with an agreement expected in the coming days.
This potential removal of a huge risk to markets, the world’s largest economy defaulting on its debt, has reduced the need for gold and its safe-haven appeal. As a result, after challenging its record-high price earlier in the month, gold is now on course for its third consecutive weekly loss.
Yet while gold is undoubtedly trending downwards currently, it is worth remembering that $1,950 an ounce remains a very high level historically for the precious metal and it is still trading well over $100 an ounce higher than where it was at the start of the year.
Market confidence will certainly be given a positive boost if and when Messrs Biden and McCarthy do find agreement on the new US debt ceiling but with Europe’s largest economy, Germany, now showing as being in recession, there remain plenty of reasons for a cautious approach among investors, which will ensure gold remains well supported.
So while the highs of May are unlikely to be challenged again, gold should stay comfortably above $1,900 an ounce until investor confidence has picked up considerably from where it currently stands.
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. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.