Helena Izotova
The “fiscal cliff” issue is not resolved yet. The US authorities only managed to postpone it for 60-90 days.
They have already used the entire arsenal of tools. There is no more weapons to fight against the budget deficit, except tax hikes or direct emission of money.
Still, investors are more worried about the necessity to raise the debt-ceiling. Most experts are sure that, the US authorities will eventually have to raise it.
The chart below reflects the direct correlation between the US debt ceiling and gold prices.
According to the calculations made by Dr. Yoo from Korea Investment, if the US debt ceiling is raised by $2000bn, gold prices will exceed $2000/oz.
As the global economic and financial situation is getting tougher, the US authorities do not want to make their public debt even bigger. Therefore, there is high probability of a decline in the market of the US Dollar index.
Moreover, HSBC expects the demand for gold in India to recover.
The chart below, courtesy of , reflects the current state of affairs in the market of gold. They say there are no clear reasons to enter the market at this point as the market gives no distinct signals.
Helena Izotova
