There were concerns that the U.S. federal debt will reach its legal limit, requiring her to take extraordinary measures just to keep paying the bills. From both an economic and a financial perspective, a failure to raise the debt ceiling would be an unmitigated disaster but harm may also be done by continuing to ignore deficits entirely or by subjecting an economy that is already heavily dependent on monetary and fiscal stimulus to extremely rapid fiscal tightening.
The greatest risk is that the government defaulting on the debt.
As investors concentrated on the European debt crisis and saw treasuries as a safe-haven asset, Treasury rates actually decreased. A true U.S. Treasury default, however, might cause this trend to abruptly reverse if investors lost trust in the United States' ability to make future debt payments. A wide variety of financial assets, including U.S. bonds, stocks, and the currency, might be severely harmed by this. The public's lack of opposition to stimulus means that deficits and debt will rise once more in the coming years. This can then result in increased domestic inflation and foreign borrowing. Additionally, it may limit future expenditure and lead to greater taxes in the future. It may even finally result in a different kind of debt crisis where international investors question not just the U.S. government's desire but also its capacity to do so without inducing inflation.
Hence my focus on Gold.
Based on the current daily chart, we see gold reaching a strong resistance. However, based on not only the above mentioned but also geopolitical tensions, I am still long on gold and expects it to reach higher levels like before.
The greatest risk is that the government defaulting on the debt.
As investors concentrated on the European debt crisis and saw treasuries as a safe-haven asset, Treasury rates actually decreased. A true U.S. Treasury default, however, might cause this trend to abruptly reverse if investors lost trust in the United States' ability to make future debt payments. A wide variety of financial assets, including U.S. bonds, stocks, and the currency, might be severely harmed by this. The public's lack of opposition to stimulus means that deficits and debt will rise once more in the coming years. This can then result in increased domestic inflation and foreign borrowing. Additionally, it may limit future expenditure and lead to greater taxes in the future. It may even finally result in a different kind of debt crisis where international investors question not just the U.S. government's desire but also its capacity to do so without inducing inflation.
Hence my focus on Gold.
Based on the current daily chart, we see gold reaching a strong resistance. However, based on not only the above mentioned but also geopolitical tensions, I am still long on gold and expects it to reach higher levels like before.