Gold and Silver Prices rush to the upside each time that the US goes deeper into debt. Gold Futures are trading near the highest level in more than a month before US House Republicans vote on suspending the debt limit until May 19. Comex Gold Prices reached a four-week high of $1,696.28 on Jan 17.The United States is on track to run out of room under its congressionally-imposed borrowing limit of $16.4 trillion sometime between mid-February and early March, and a vote to suspend the debt ceiling would take the prospect of default off the table at least temporarily. Along with the looming Debt Ceiling, Congress confronts March deadlines on a measure to fund the government and $1.2 trillion in scheduled automatic spending cuts. As the debt limit bill moved through Congress on Tuesday, some lawmakers expressed concern the short-term nature of the measure would not calm jittery financial markets. Congressional Republicans have in the past balked at raising the debt cap without securing matching or greater spending cuts in exchange, and have raised the specter of default as a bargaining chip. But they backed down from that stance at a policy retreat last week, preferring to shift the focus of budget battles with the White House to a March 1 date for automatic deep spending cuts and a March 27 expiration of funding for government agencies and programs. The US Debt Ceiling talks, seen as a potential threat to the recovery of the world’s top economy, have shown positive signs, as the House of Representatives plans to pass a bill on a nearly four-month extension of the borrowing limit. Global investors say the state of the U.S. government’s finances is the greatest risk to the world economy and almost half are curbing their investments in response to continuing budget battles. Financial Markets may hit the panic button if the bill is not passed and the Gold and Silver Markets may see sharp price rises.
A price rebound in Gold and Silver has encouraged speculators to start rebuilding bullish positions in the precious metals futures and options, according to U.S. Government data released Friday. The robust inflow in Silver ETFs has helped spot Silver Prices rally more than 6% so far this year, as the metal’s exposure to a quickened pace in economic growth attracted investors. Holdings of iShares Silver Trust, the world’s largest Silver ETF, stood at 10,689 tons on Jan. 22, up 604.9 tons, or nearly 6% from the end of 2012. In comparison, SPDR Gold Trust, the world’s top Gold ETF, saw an outflow of nearly 15 tons so far this year. House Republicans are scheduled to vote today on the temporary suspension of the $16.4 trillion debt ceiling. The proposal is intended to prompt the Democratic-controlled Senate to approve an annual budget, something it hasn’t done in four years, by withholding lawmakers’ pay if a budget isn’t passed by April 15. The state of the US Government’s finances is the greatest risk to the world economy, a Bloomberg poll showed. Gold Bullion may climb over the next three months as U.S. lawmakers attempt to tackle the Debt Ceiling and the world’s largest economy slows, Goldman Sachs Group Inc. said in a report dated Jan. 18, advising investors to place bets on gains. Gold Prices were steady at $1,699.77 an ounce on the Shanghai Gold Exchange.
It looks like the Debt Ceiling problem may get solved – though for the time being and investors would pour money into riskier assets like Base Metals, Silver or the Stock Market rather than Gold against the backdrop of a global economic recovery. A measure to extend the US Debt Limit for nearly four months moved closer on Tuesday to a vote and the White House said the president would sign the bill if it cleared Congress, easing uncertainty that could have threatened the US Economy. In the likely event that the proposal is passed, we expect that the market could once again enter a ‘Risk Off’ period which could lead to preferential buying of the U.S. treasury bills and lead to a temporary softening in Gold Prices over the near term. The Debt Limit “suspension,” which would allow the government to borrow money until May 19, is due to come to a vote in the Republican-controlled House of Representatives on Wednesday without amendments. House Rules Committee Chairman Pete Sessions of Texas said he believed the measure would achieve “near unanimous support” from the House Republican caucus, which would guarantee its passage. The administration and some Democrats made clear on Tuesday they would prefer a longer-term reprieve from having again to seek an expansion of the nation’s borrowing capacity. But the White House welcomed movement on the contentious issue, which has financial markets worried about a self-engineered US Debt Default.
Crude Oil Futures for March delivery shot up to $96.89, settling at $96.68 a barrel on the New York Mercantile Exchange yesterday, shaking off some earlier pressure from disappointing U.S. economic data, as traders focused on upbeat news elsewhere that lent support to prospects for stronger Crude Oil demand. This has been the highest close level in more than four months for WTI Crude Oil. This could be a signal that the market is moving early into its seasonal uptrend, with a normal low tending to occur in late January or early February. Looking ahead, weekly petroleum inventories data have been delayed this week due to the Martin Luther King Jr. holiday on Monday. U.S. Energy Information Administration – EIA, will issue its Crude Oil inventory report Thursday. Crude Oil Prices near term outlook may now have a reduced upside potential and increased downside risk. MCX Crude Oil in India is trading up at Rs. 5212 & can rise further to Rs. 5257 to 5293 also.
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