The price of gold reached an all time high of $1,589.56 an ounce yesterday, as the dollar fell amid concerns that the US may default on its debts.
The gold price has subsequently dropped a little from the peak, but nonetheless expectations are for it to remain high until US politicians agree how best to tackle the deficit and raise the country’s debt limit by 2 August.
As the dollar falls, gold becomes more affordable which further enhances its quality as the traditional safe haven for investors in turbulent times.
We do not believe that the US will default or that Moodys will cut its debt rating easily, as the consequences across the world could be drastic and the Federal Reserve Chairman regards it as an unacceptable situation.
Patience and time are running out for the US to agree a solution, with pressure coming from all sources, most notably China, who are the largest holder of US debt in the world. A spider’s web of politics, economics and knock on effects are inevitable over the coming weeks, but for investors holding gold and gold equities, there should at least be some cold comfort as America sneezes.
Tags: gold, equities