Christian Debt Recovery

Us Debt Ceiling 2011

July 27th, 2008 |

Author: Gavin

us debt ceiling 2011

It appears there is more to the gold rally than the US debt ceiling crisis…

The aversion of a US default failed to prick the gold price’s bubble. Despite a deal being made to raise the US debt ceiling, gold rallied to a fresh all time high this morning (3/08/2011) of over $1670. It appears that the gold rally is founded on more than just the debt ceiling issue.

Fatigue is influencing the market; the gold market has now been responding to the sovereign debt crisis for over a year. Can it really continue to be such an influencing factor when it is becoming everyday news?

The US debt ceiling talks failed to trigger the relentless demand for gold bullion we have seen in the past. Demand has been steady; however it is not nearly as big as in the spring of 2010, momentum is flagging.

The markets now seem very concerned that the US may see a downgrading by credit agencies. In short, persistently weak economic data coupled with rising global risk sentiment is giving a lift to gold.

When investing in gold, it is generally recommended to invest 5-10% of a portfolio, it is important not to invest too much. Right now gold is being termed ‘the best safe haven investment’, however it possible to have too much of a good thing. Gold will always retain some of its value when other investments are falling but gold holdings provide no real income and prices can be volatile, especially in the short-term.

Data also suggests Global economic growth is also sliding and historically countries facing huge debts grow at a much slower pace, which leads us to wonder whether the US will be able to find its feet again? Raising the debt ceiling means more debt, more mal-investment, more fiscal imprudence, and less likelihood of the debt ever being repaid, all of which helps gold remain bullish in the long-term.

Fear and greed are commonly the two emotions that drive gold, however at the moment it seems fear is winning. When gold stocks rise with gold, greed is at the helm but when gold is climbing on its own, fear is driving.

The accumulation of wealth, particularly in China and India is also a long-term driving force for the gold price. China and India share a strong cultural affinity for gold as an investment and jewellery. September has traditionally been the beginning of the gift-giving season for gold. This is the time of year when gold jewellers are the busiest. There is a positive correlation between gold jewellery demand and rising prices with increasing wealth.

One of the biggest threats to gold is the rise of interest rates. If returns on paper money get better, then it could tempt some investors to sell their holdings. There are also fears that the gold price is in “bubble territory” and it’s dangerously close to peaking. Some wealth managers are now avoiding gold altogether, amidst concerns that gold’s climb has run its course and prices will now fall.

Given the run gold has had, it would not be surprising if it starts to correct itself, however there are still fundamental economic issues that remain unresolved and no political will or courage to make the changes that are necessary.

About the Author

KK Bullion offers you the opportunity to participate in a rising gold market with gold bullion. Buy or sell gold bullion, have it delivered securely or we can store your gold bullion for you in our Vault. Click here to buy gold bullion.

2011 Federal Debt Limit Extension Controversy: Official Reports, Potential Effects on Government Operations, Treasury Department Assessments and Possible Actions, Federal Debt Management

$9.99

The ongoing controversy in Washington over raising the federal debt limit is the subject of this comprehensive, ten chapter, four-hundred page ebook which provides detailed and authoritative information on all aspects of federal debt management. Treasury officials believe that a failure by Congress to raise the debt limit would have catastrophic economic consequences. Congressional Republicans hav…