Gold have opportunity to extend the rally from record levels this month. The rate of gold will continue if President Barack Obama won the agreement of lawmakers to raise U.S. debt ceiling. Korea Investment & Securities Co.. call, the weakening U.S. dollar will drive demand for the precious metal as a safe haven.
Gold Price Risen with Increases in U.S. Debt Limit
Chart of the Day indicates the spot gold price in dollars has risen with increases in the U.S. debt limit over the last 16 years.
Gold for immediate delivery hit a record U.S. $ 1,610.10 per ounce troy , yesterday, as fears of debt crisis in Europe and U.S. would disrupt global financial markets, so that boosting demand for gold. Meanwhile, last year, gold prices have soared 33% against the U.S. dollar.
Korea Investment Analyst Julia Yoo said, the gold rally is quite explosive. Increasing the debt limit means the U.S. dollar will print more. This will weaken the dollar and lifted gold prices. “So that adds to the strengthening of the year driven by demand from countries, including China,” he said.
Condition of US Economy
Obama negotiating with congressional leaders to raise the debt limit of U.S. $ 14.3 trillion, before the meeting on August 2. Earlier, Finance Minister Timothy F. Geithner said the government will run out of options to prevent default. Standard & Poor’s Ratings Services and Moody’s Investors Service has said the possibility downgrade of a credit ratings the government if Congress does not act.
The head of commodities research at Deutsche Bank AG Michael Lewis judge, an important debt limit in 2011 considering the dangers of default in the U.S., and increased attention to debt levels are sustainable into the future. “Although I hope the U.S. can avoid a technical default, but if that happens the U.S. stock market is estimated to be more depressed, and adds support for the gold rally,” he added.
