After a few days of dips in precious metals prices, gold and silver have proven their performance once again as investors and analysts await the upcoming debt-limit talks. Many remain weary that the U.S. debt ceiling debate will fuel further economic turmoil, only devaluing the U.S. dollar again. With this fear and further U.S. dollar drops, more flocked toward gold and silver to protect their finances as they await the decision.
Spot gold increased by 0.1% to $2,013.99 after hitting a lull on May 12. While the precious metal may have dipped between May 5 and 12, recent increases show the dip was only a temporary trend in the long-term rise. U.S. gold futures held steady at $2,018.80.
“Bullion remains supported above $2,000 by persistent anxiety over ongoing U.S. debt-ceiling talks as well as hopes that the Fed is done with its rate hikes,” Han Tan, the chief market analyst at Exinity, explained.
All focus in the last week has been pointed toward this upcoming debate and whether or not the U.S. government will default on its debt obligations. The White House and Congress will meet to discuss the debt limit extension pressing matter as the U.S. government could run out of funds as soon as June 1. Republican and Democratic officials are attempting to meet on common grounds to find a solution and prevent the nearing economic catastrophe of a government default on debt, according to Treasury Secretary Yellen.
Consumer sentiment in the United States dropped to a six-month low this month due to concerns over how the political arguing over raising the government’s borrowing limit could be the final straw, triggering a recession. Each new hit sends analysts and investors into a gold-buying frenzy in fear of the looming recession. The year started with aggressive interest rate hikes that sparked the fall of SVB Financial, leading us to the banking crisis, before more dwindling events like the oil cutbacks, manufacturing activity slowdowns, job data reports, etc.
The U.S. president, Joe Biden, announced that he believes the meeting will end with congressional leaders raising the debt ceiling to avoid total economic meltdown.
“Still, gold risks being temporarily dragged back into the sub-$2,000 domain on a major risk-on wave stemming from a deal to lift the U.S. debt ceiling in the immediate term,” Tan continued.
If the Fed signals another rate hike, the precious metals could experience another temporary dip. Investors might see this as an opportunity to strike while prices are low, considering the general long-term consensus on performance. While the precious metals may quickly dip or spike in response to government actions, most analysts expect impressive long-term gains from gold and silver throughout 2023 and onward.
Markets currently believe the Federal Reserve will keep the current interest rate in June, with a 78.8% consensus on the opinion. Conversely, Fed Governor Michelle Bowman believes interest rates must go up to combat the climbing inflation rates.
Spot silver prices increased by 0.5% to $24.02 per ounce in response to the upcoming meeting, while platinum rose a whopping 1.3% to $1,062.87 per ounce and palladium gained 1.4% to $1,530.33 per ounce.
The U.S. dollar index remains weak in outside markets while June gold future bulls carry the near-term technical advantage.
On the daily-bar chart, prices have hit the 2.5-month uptrend. The next upside objective is to push resistance at a record high of $2,085.40 per ounce with downside technical support at $1,980.90 per ounce. As of May 15, resistance hit a high of $2,040.00 per ounce with a weekly low support at $2,005.70 per ounce.
July silver futures also carry the near-term technical advantage, with the next upside pricing objective placing solid resistance at $26.435 per ounce and the downside objective with support at $23.00 per ounce. As of May 15, top resistance was seen at $24.735 per ounce and the downside support hit $23.50.
For the next few days, all eyes will be on the congressional meeting to better understand the U.S. economy’s fate. The decision may affect prices in the short term, though ultimately, gold and silver should continue rising throughout the year, according to market expectations. If we see a sudden dip following the meeting, that may be the opportunity to buy in.
While gold and silver occasionally offer short-term wins, they often perform best as long-term investments. The economy’s current affairs may create the right environment for long-term precious metals gains.
As always, investors should consult their financial advisors before making any portfolio decisions.