The debt ceiling drama ended with fake budget cuts and a shiny new credit card with no limit for the federal government. We can now expect a big surge in the national debt as the US government plays catch up after nearly six months up against its borrowing limit.
So, how might this impact the price of gold?
If history is any indication, it will likely drive it higher.
In this episode of the Friday Gold Wrap, host Mike Maharrey engages in a little “I told you so!” discussing a couple of things he got right, including his assertion that the real problems would start after the debt ceiling deal and that it was important to keep your eye on the commercial real estate market. He also talks about the yo-yoing gold price this week.
Gold-backed funds reported an inflow of gold for the third straight month in May, flipping global ETF demand positive on the year.
I warned you.
I said when the fake debt ceiling fight ended, the real problems would begin.
Well, the debt ceiling fight is over, and here we are.
On the first working day after the so-called Fiscal Responsibility Act went into effect, the national debt surged by $359 billion.
The April trade deficit came in at -$74.5B which was the largest trade deficit since October 2022.
With the passage of the Fiscal Responsibility Act of 2023, the fake debt ceiling fight is over.
The federal government walked away from the deal with a shiny new credit card that has no limits.
And what did we get?
Spending “cuts” that actually increase spending and another great big tax increase.
Most people in the mainstream concede that the economy is heading for a recession, but the consensus seems to be that downturn will be short and shallow. Projections by the World Bank undercut that optimism.
According to the World Bank, global growth in 2023 will slow to the lowest level since the 2008 financial crisis.
A large sale by Turkey in April caused global central bank reserves to fall for the first time in over a year, even as central bank gold buying continued.
Official global reserves dropped by 71 tons in April, according to the latest data collected by the World Gold Council.
With a debt ceiling deal done, the threat of a US government default is off the table for the time being. But a wave of corporate defaults is on the horizon according to Deutsche Bank’s annual default study.
This is the inevitable consequence of central bank monetary policy and it was entirely predictable.
Please note: the CoTs report was published 06/02/2023 for the period ending 05/30/2023. “Managed Money” and “Hedge Funds” are used interchangeably.
Managed money has once again bailed on gold, which drove the price back below $2000 an ounce despite the “Other” group stepping in to absorb some of the selling.
