Mounting fears over the US debt ceiling crisis will benefit gold as investors brace for potential chaos in financial markets, according to RBC Capital Markets.
Hopes for a deal to avert a first-ever US default were set back after President Joe Biden and House Speaker Kevin McCarthy postponed a meeting set for Friday that had been aimed at resolving the impasse. RBC Capital Markets strategist Christopher Louney said the fraught negotiations had set the stage for a near-term boost to bullion, which is within striking distance of a record high.
“Even assuming a deal is eventually reached, we wouldn’t disregard potential growing financial angst as the deadline approaches,” Louney said in a note. “In the near term, we believe gold looks like the best hedge.”
Meanwhile, markets are pricing in rate cuts later this year, also helping to support non-interest-bearing gold. Those bets have been reinforced by a raft of data this week showing cooling US inflation as initial jobless claims reached the highest since October 2021.
Spot gold edged 0.1% higher to $2 017.07 an ounce as of 8:38 a.m. in Singapore, after sliding 0.7% on Thursday. The Bloomberg Dollar Spot Index was steady, after rising 0.5% in the previous session. Silver was little changed, while platinum and palladium slipped.